Hope you had a happy new year and Christmas
I need some advice on the QuickBooks chart of accounts. We collect $1,000 from our clients as an opening deposit when we set up a new bank account for them. Historically we showed this in QB as a liability account (Client Funds). The idea being that when we are holding it it’s a liability as it’s not our money, when we deposit it into their account, it then comes out of the liability account and balances out.
However in practice, that doesn’t happen and QB seems to enter 2 credits, the invoice and the client payment, but only 1 debit, consequently the account doesn’t balance.
If we have an income account and a separate COG account in theory they should both grow the same and balance. But if we do it that way are we increasing our business income and COG, when in reality it’s not part of our business income.
What is the best way to handle these transactions.???????
Thanks for the reply, but I'm not sure I explained myself well enough.
We issue an invoice (otherwise the client won't send the money) see attached. typically we'll collect the invoiced amount from the client by ACH in to our Chase checking account. we'll then move the $1,000 to our Escrow account, once the clients bank account is open we'll then transfer their $1,000 by ACH. That bit is easy. the bit we're struggling with is how we recor it in QB.
We have 2 products as you can see from the invoice. The 'Opening Deposit' was stup as arriving into the 'Client Funds account' which is setup as a 'Liability account'. The product was marked as 'We purchase it' and the cost account was setup as the same as the income account. My reasoning being that the funds be added and removed leaving the account balancing at zero.
That didn't seem to work, now we're stuck.
We also have lots of strange accounts in our Char of accounts and I'd really like to go through them with you and sort them out properly.