You collect a deposit or retainer from customers upon accepting an order. You then collect the balance when your service or delivery is complete. How do I handle this ?
You collected $50/- as a deposit from the full amount of $200 for your complete services. You will thus collect another $150 when you complete the works or services. There are a many ways to handle this. Here are some suggestions :
Issue an Invoice of $200/-. Charge to Account ‘Revenue – Sales’ . Enter a partial payment of $50 and post the the Account where the deposit was banked in to (usually bank or cash account). This method has a disadvantage when used in large amounts or if the time frame to complete the works was long. It gives a false impression that the Sales for the month was very good. If your accountant enters the values directly from Ezy Invoice Sales & Receipts Summary of accounts to their GL, your Profit & Loss would look like its very healthy for the month but in actual fact its not. This method is only suitable for small amounts or short time frames between deposit & final collection. If you are a taxable company, this method also has tax implications as you would need to report on the tax collected for the full amount of $200 upfront even before you received the entire sum.
Prepare an Invoice for $50/- Indicate in the body text that it is just a deposit for the full amount of $200/-. Post this Invoice to Account Revenue – Sales . When balance is due, issue another Invoice of $150/- and indicate in the text that this is balance payment. Again post to Account Revenue – Sales. The advantage of this method is that Sales of $50/ is recognized first when the deposit is due and the Sales of $150 is recognized later when the balance payment is due. This will reflect more accurately the sales and debtor status of the business.
Create a New account ‘Advance Payment Received’ or ‘Deposit Account’ using the menu option Go To | Accounts. Prepare a new Invoice of $50 and charge it to ‘Advance Payment Received’ or ‘Deposit’. When final payment is due, prepare another new Invoice and post it to Sales or ‘Advance Payment Received’ . In this method, your accountant will need to pass a journal in their GL to recognize Sales for the $50/- at a later time when the works are completed and the final amount is received.
These are just a few suggested methods. If you are unsure, consult your Accountant for best method for your situation.