How To Track Customer Deposits

by Wayne D
(Florida)

I need a program that will let me track cash deposits made in advance of purchase even when no final amount has been determined. There is no time limit and the deposit could simply end up being refunded to the customer if no purchase is made.

I also need to be able to print a daily report for tracing purposes.

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Wayne, check out my chat about how to track customer deposits in QuickBooks.

If you don't use QuickBooks, perhaps you can get your bookkeeping software to do the same thing.

Hope that helps.

P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

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Oct 22, 2014
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How to release a customer deposit
by: Jenny

I have allocated a customer deposit by the liability method. However, there are a few things I need to ask.

We have received, a $350,000 deposit for material and have already purchased $100,000 of the materials required for the job on our operating line of credit.

Now instead of my operating line (liability) being $0, it is at $100,000. At the same time, I still have a customer deposit liability of $350,000.

Is there any internal billing or recommendations you can make to help offset the liability which I feel is now overstated because the $100,000 was expensed.

Oct 22, 2014
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Jenny
by: Lake

Your best bet before you start booking entries is to ALWAYS figure it out intuitively. THINK your way through the transactions. Let's start our thinking by breaking your events into separate transactions as follows:

1. Book the $350,000 customer deposit received. I will assume when you say you booked your customer deposit using the liability method, you followed the steps I discussed here.

2. Book the $100,000 of materials purchased to your operating line of credit:

DR COGS Materials $100,000 (breakdown to more than COGS account if appropriate)
CR Operating Line $100,000

From your post, it sounds like you have done all of this.

Your account balances should reflect this as follows:

Cash in Bank $350,000 debit
COGS Materials $100,000 debit
Customer Deposits $350,000 credit
Operating Line $100,000 credit

3. When you pay down your line of credit, you will:

DR Operating Line $xx (whatever your payment - could be one or many)
CR Cash in Bank $xx

4. When you invoice (or progress bill) your customer for the job you have to remember to apply your customer deposit to the invoice. See the link in step one for how to do this.

DR Accounts Receivable $350,00 (sets up receivable)
CR Sales $350,000

Once you've done these entries your account balances should look something like this:

Cash in Bank $350,000 debit - $xx payment on line of credit
Accounts Receivable $350,000 debit - $350,000 customer deposit applied = $0
COGS Materials $100,000 debit
Customer Deposits $350,000 credit - $350,000 applied to A/R = $0
Operating Line $100,000 credit - $xx payment on line of credit

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