 QuickBooks Online 2022. Advanced Customer Payment or Unearned Revenue Method number two. Get ready because it's go time with QuickBooks Online 2022. Here we are in our GeekRank Guitars practice file we set up with a 30 day free trial. Holding down control, scrolling up just a bit to get to the 125% currently in the home page, otherwise known as the Get Things Done page. Business View as compared to the Accounting View. If you wanted to change to the Accounting View, it's something you can do by going to the cog up top, switch to the Accounting View down below. We will be toggling back and forth between the two views, either here or by jumping over to the sample company file currently in the Accounting View. Back on over, let's open a few tabs so that we can put reports in them. Right-click it on the tab up top, duplicating it to do so. Right-click the tab to the left, right-clicking again and duplicating tab to the left. Right-click again and duplicate again and then we're going to go to the prior. Let's go look at the prior Accounting View in the sample company just to locate where the reports are located in the Accounting View, which is down here in simply the reports on the left-hand side. Back on over to the Business View, second tab, reports located in the Business Overview tab and we're, of course, in the Reports area, closing up the hamburger and then we're going to go down to the Balance Sheet, open up the trusty balance sheet, change the range, the rangeings, they're changing. 0101222123122, run it, tab to the right, tab to the right and then Business Overview again, close up the hamburger. Profit and loss, the P&L, this time income statement, the rangeings, they are changing. 01012221232, year-to-date income statement here, running it, tab to the right. One more time, Business Overview, this time let's take a look at the income statement again but do it for the current period, current month, closing up the hamburger and we're going to do that here starting at 0201222123122 so we see the current month activity and the year-to-date then activity on the right. We've got another scenario where we're going to have a deposit first so we're going to go back to the first tab, this is an unearned revenue type of situation where we got the money before we did the work, imagining in our scenario that we have someone asking for a guitar and we're saying, hey, we don't have that guitar on hand right now but we'll try to get it for you or do whatever we need to do but we want to make sure that you're committed to purchasing it so we would like to pick up a down payment up front so what happens then is instead of having an invoice and then the received payment we are in essence having a received payment before we enter the invoice but if I use a received payment before I enter the invoice although that works great logistically internally for bookkeeping use and it links up the invoice and receive payment as you would expect it creates a negative receivable for that particular client which is not actually completely proper from a reporting standpoint because we should have a positive liability unearned revenue account instead of a negative receivable so last time we talked about this kind of problem and how we can basically adjust for it with an adjusting entry at the end of the period to take the negative receivable and create a positive liability allowing you to make the received payment before the invoice and use all the connectability that goes along with that but if you wanted to then not do that and record unearned revenue straight away we can look at a method for that so in other words, if I go back on over to my flowchart over here this is from the desktop version but we're just looking at the flowcharts the reports are in essence the same we have usually an invoice then receive payment and then we record the deposit here we're getting the money first so you would think that we would get the money that would increase the cash account in some way shape or form and the other side usually would be decreasing the accounts receivable but in this case we'd have either a negative receivable because the receivable account is what is used in order to track the customers or properly we should have basically a positive liability account called unearned revenue the problem with a positive liability account called unearned revenue is that we're not able to track it as easily from just a logistic standpoint for software because the account that's used to track the customers is accounts receivable type of account but from an accounting standpoint with just re-journal entries like from a book problem we think that you would increase the liability that's what you would want to do there so now we're going to try to do that we're going to try to increase the liability going to go back on over to our tab let's take a look at what we did last time to compare and contrast it I'm going to open up one more report which is going to be the accounts receivable sub ledger I'm going to right click and duplicate again to do so and then I'm going to go I'm going to wait for it because the computer is a little slow but that's okay patience and then we're going to go into the business overview left-hand side reports and close up the hand boogie and then we're going to go down to who owes you and let's go to the customer balance detail report customer balance detail going to do the range change or just a date change up top customizing it to 123122 run it change a little bit of the details so I can see more detail customizing the detail up top and I'm going to go to the filters and let's add the all of this stuff all the AP run it and so now I can see the activity and like Mr. Anderson was the one we completed the full process for last time using method number one where we entered the payment before we entered the invoice and we were able to link those two up the sub-customer account here and you've got a really nice layout on the detail that's the benefit although if you aren't able to link those up and you're doing a report you could end up with something like this with this negative balance for a customer in this case Eric Music that's the problem that we don't want to do because it's understating the receivables and it's not reporting the liability so that's we're going to try to record it in this case to have it go to unearned revenue if I go back to the first tab you can also see that detail here if we went into the get paid and paid area and if I went into the customers for Mr. Anderson which is if you were in the accounting view by the way would be in the sales area and then if I went into Mr. Anderson again in here the detail looks great on the last method number one because I'm able to tie out the invoice and the payment quite nicely now let's try the second method someone's coming in and we're going to say it's going to be string music and they're requesting this guitar let's make an estimate first this time and that's going to base what I want for the prepayment so I'm going to say okay let me make an estimate of what you want here what we can order for you and that's going to be let's call it string music we can actually record anything it's just going to be an estimate and so on 227 let's say this happened and we're going to say that string music wants an EPSP and they want let's say they want that and that's it for 600 so there we have it so that's going to be our estimate I'm going to change the tax down here I'm going to click down here so it calculates the tax and then I'm going to change the tax to our standard 5% for the practice problem overriding it because I just want the generic 5% for our practice problem purposes so to have a generic 5 reasons other because reasons and so there we have it so now we might use this now to determine how much we're going to get paid so we might say okay I'm going to take 10% of that or something like that then determine how much we want a down payment for that might be our standard process then I can save the estimate and use this to then make my order or whatever to base my order on or find the guitar for this person and I could basically also then base the down payment on it so I'm going to say save it and close it I'll save the estimate and so we're going to go okay in the customer area let's go into music now is that who I did it for yes string music string music is down here so now we've got our estimate that didn't actually record anything on the financial statements let's assume that we want now a down payment of $100 that we might base on the estimate we just made up $100 so down payment of $100 so I'm going to hit the plus item here if I hit the plus item instead of hitting the receive payment because that'll make a negative receivable I'm going to do method number two which is basically I'm just going to make basically a sales receipt which is kind of a little bit of a misuse of this form because this is usually the form that you make when you make a sale but we're going to adjust the item so that we can have an item that's going to go to the unearned revenue now before I do this note that I'm going to have to add an account called unearned revenue as I go and I don't like to do that in the business view so I'm actually going to switch this I'm going to close this up I'm going to change it to the accounting view I'm going to take another tab to do it I'm going to right click on the tab up top and duplicate it and in this new tab I'm going to change it to the accounting view because I'm going to add an account and that's where I think the business view currently is most restrictive and doing stuff I don't particularly I'm not a fan of it so I'm going to switch to the accounting view for this process ok so now let's go back into the plus button up top we're going to do a sales receipt type of form and this we're going to imagine we got the money now from string music the customer string music string music we've got the money and this happened we're saying on the 27th I believe is correct and then I'm going to go down and just say now I can't put the actual product that they purchased down here what I want to do is use this to make a new item that's going to go to a liability account so I'm going to make a new item and so I'm going to say add an item and it's going to be I'm just going to call it a service item so there's no inventory dealing with it or you can call it a non inventory item and this I'm just going to call this item customer deposit customer deposit is going to be the name and it should be the description down here I'm not going to put a dollar amount the key is the income account I want it to go to is now going to be the unearned revenue which I don't believe we're going to have it I'll try to type it in unearned revenue we don't have one yet so let's type it in here let's type it in unearned revenue I think that's spelled right let's add that so I'm going to add it it's not going to be an income account it's going to be a liability account so it's going to be another current liability and then deferred revenue I'll keep it there it's going to be an unearned revenue that looks good so let's save it let's close it unearned revenue and it's going to be a non-taxable item here so typically I would try to get the non-taxable this is being a little finicky to me I'm going to say it's non-taxable and say okay and then save it so there we have it so this I'm going to there it is I'm going to say the rate then what's this going to do it's a sales receipt which usually means we're going to have an income account impacted in this case though we use the item to drive it to a liability account so the sales receipt is still a little deceiving because you would think it would be going to income but no it's going to increase the unearned revenue like normal or in other words it's now called payments to deposit the other side is going to go into the liability because we drove it there with this item that we're using so let's save it down here I'm going to say save it and close it let's check out what happened let's go to the balance sheet and let's freshen it up running it and then I'm going to go down and say now we've got this money that's in the payments to deposit there's the $100 there and the other side didn't go into income but rather went into this liability account which we called unearned revenue so there it is unearned revenue and now it's $100 increasing there and so notice what it's not doing however it's not applying if I go to my receivable ledger over here it's not going to be in this receivable report because this receivable report is dealing with the customer is dealing with the invoices typically and applying the credit out so we don't have the ability to basically apply the credit out in the same way because this receivable report is tying in the accounts receivable not the unearned revenue also if I go to the first tab and I take a look at the customer information over here customer tab and I'm going to go into the customers here close up the hand boogie we're looking at string music so we see the detail here and in here we've got this sales receipt for the $100 and we can see that sales receipt which is good but it doesn't show as we saw before as it being basically unapplied an unapplied credit so this is we can still see it we can still make this work but we don't see that unapplied credit over here whereas if I was to look at one of these other clients that we made a did the other method with then we had for example Eric music I believe was one we had then here this unapplied amount quite internally I think this method works better even though it doesn't report it quite as nice as being method number one but for reporting purposes we got what we wanted we got what we would expect here we've got this liability a positive liability instead of the decrease to the accounts receivable basically a negative receivable amount so let's imagine now that we got we're going to complete the sale we're going to make the invoice now if I go back into string music I'm going to say let's go back in here and say we're in string music down here string music and we've got a note they already paid us that $100 we've got to be able to recognize that and then when I make the invoice it'll look something like this I'll hit the plus button up top and let's make another invoice and we will make the invoice and say this is going to go for string music string music and then we have over here the estimate populating and we do want to use the estimate so I'm going to pull the estimated information over we're going to pull in the estimate and so that looks good and so let's make this on the 28th and I'm going to just make it because I think I made the last one on the 27th and so there we have it so now it pulled over that $600 and we've got the sales tax which I'm going to adjust to a standard 5% so I'm going to select the sales tax and I'm going to do our generic 5 generic 5 and then reasons that's why and then close it so there we have the 630 now I'd like to apply out the amount that they've already given us $100 so I'm basically going to say that we've got the $100 by using that same item which is the customer deposit customer deposit but this time I'm going to put it in there as a negative 100 and we know that that item is going to the unearned revenue account so when I record this out then it's going to put that negative 100 to the unearned or the unearned revenue decreasing the unearned revenue down so we can then see that notice that I made it non-taxable so this tax is applying out to the sale item that we made up there so it's applying out to the $600 and not the $100 down payment that we've gotten so you can see a little bit different in the structure of the invoice that we're looking at here I didn't put the $100 down below we have it basically up top within the calculation of the invoice but it's still something that can be seen by the customer basically on the invoice so we got the $600 there's the customer deposit there's going to be the $500 the tax however being calculated on the $600 at the 5% so what is this then going to do well it's an invoice so it's going to be increasing the accounts receivable but it's going to increase the accounts receivable this time for the full amount the $557 down below the bottom line number it's also going to be decreasing due to this amount the amount on the liability account instead of going to a revenue account which is usually what these items will basically be going to and then we're going to have the sales are going to be increasing the sales are going to be increasing by the $500 instead of this account because this account again not going to sales it's going to be decreasing the liability account and then the sales tax is going up by the $57 we've got the cost of goods sold or the inventory going down by the amount driven by this item not $600 but known by the system through this number here and we've got the cost of goods sold which will be impacted so let's save it and close it save it and close it and then we'll check it out now first note that if I look in this area I'm still in string music so I can see the activity we made the estimate and then we made the sales receipt right here which we then kind of applied out but we did it in a little bit more strange of a way using the items to the invoice down below so you can see the activity but it's probably not as easy from an internal use this layout then if we went up to Mr. Anderson up top if I was to look at the internal use for method number one and go into here here we made the estimate and then we made the sales receipt which was then saying it was unapplied and then basically it applied out to the invoice automatically although we had to go into the invoice and go back out of it I think this method from an internal standpoint is probably more intuitive for most people working internally because you could just see it with the forms I don't have a sales receipt that I have to remember because it's a deposit instead of normally how a sales receipt works and so on so that's going to be the two methods there if I go to the balance sheet let's go to the balance sheet and run it holding control scrolling up just a bit and I go into the accounts receivable the A to the R we've got the accounts receivable that's going on the books for the invoice for string music that's going on there kind of net of what we charge so again we don't really see the invoice charging kind of like the full amount like we do in method number one the invoice is on there for what we charge and then it took out the prepayment that was applied out here we were seeing the invoice that's showing basically the amount after we applied out like the deposit which to me again a little bit more confusing and then the other side would be on the income statement so if I go into the income statement and make sure it's fresh then we've got the revenue here going into the revenue line item holding control we see then we've got then in the revenue the amount for wait a sec I'm in the services hold on a sec this was inventory let's go back into the sales of the product revenue sales of the product revenue and then we go down so there we have the 600 there that's going to be the sales price and then I'm going to go back up top then if I go back to the balance sheet we also had an impact on the unearned revenue which should go back down to zero now so unearned revenue back at zero if I go into that account so now it did what we wanted from a financial reporting purpose is it increased the liability account and then it took the liability account back down and everything was on an accrual basis reported properly as the process went without any need for an adjusting entry to shore things up and then we also have the sales tax that would be affected going to the California department of tax and then we've got the inventory which would be going down and that would be going down just like it normally would driven by the item so an amount that would not be on the invoice but driven by the item going down here back to the report and then holding control scrolling up just a bit if we went back to the income statement or profit and loss the cost of goods sold would also be impacted by it as well if I go to the sub ledger report on the right supporting the accounts receivable number and run it refreshing it and go down to the string music string music where is it right right here we've got then the invoice that is on the books here it's not showing the sales receipt because that doesn't really go through accounts receivable so again you don't really see the detail of the report on this one and the invoice is reported after the deposit has been applied out to it whereas if you would look at the detail on this one with method number one you were able to see the payment the payment was on there as a negative which wasn't right when you first had the payment but after the whole transaction is complete it's easy to track what happened you can say okay there's a payment that happened first and then it got tied out to the invoice and then you've got the difference that is still owed at this point in time so that's kind of the trade off method number two the method we're using here properly records a positive liability as opposed to a negative receivable as you can see here with method number one I've got this negative receivable which doesn't look isn't correct from financial statement purposes until we actually make the invoice but the method one I think from an internal purposes just logistic purposes the process from an internal side and you could do the adjusting entries at the end of the process so you could decide between those methods for the unearned revenue depending on your circumstances so let's open up our trial balance and see where we stand opening up the hand buggy going into the reports closing the hand buggy and typing in trial balance because we want to pull up the trial balance depending on your opinion and so we'll go up to the trial balance and there it is and let's range change from 01 01 to 2 to 12 31 to 2 run it this is where we stand if you're tying out that's great if not try changing the date range and we will be running a transaction detailed report at the end of the section which is great for diagnosing any kind of differences