A job deposit is money that belongs to the customer, but the customer has given it to you to hold or to use to purchase materials and labor for their job. In other words, it’s money in the bank, but you still need to earn it.
You should not record it as income when you get it.
The deposit is a liability on your books even though you deposit the funds into your checking account.
When you have incurred costs on the project in excess of the deposit, an invoice should be created to bill the customer for work performed to date and the amount of the deposit should get applied to the customer’s invoice. That means that the deposit will be subtracted from the amount the customer owes you for that invoice. At that point revenue is recorded and the deposit is moved out of the liability account.
This article will show you two different ways that you can record job deposits when using QuickBooks, try each method in a “test” file to determine which one is right for you.
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