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Customer Pre-Payments and Deposits
What is a Pre-payment
In some instances a Customer may be required to make a partial payment for a product or service, in advance of receiving the product or service. This is a deposit, and is sometimes called a Pre-payment.
The remaining payment will be made on completion of the service or delivery of the product.
When receiving a deposit, the money is strictly neither owned by you or owed to you, since the product or service has not yet been delivered. This payment has to be recorded as a liability, until the service/product has been delivered.
How to process a Deposit
Create a Current Liability account called ‘Customer Deposits‘.
Create a Charge Item called ‘Customer Deposit‘, and assign the Item’s income account to the Customer Deposits account created in step 1.
When you need to record a deposit first create a Cash Sale with a Customer Deposit line item for the required amount. By using the Cash Sale Document you can create multiple Customer Deposits if required. Moreover they can also be easily refunded.
When the Invoice for the Sale is issued add a Customer Deposit line item with a negative amount. This not only ensures the underlying accounting is correct but also allows the Customer to see the deposit on the printed invoice.
To issue a receipt for the Deposit, create a specific Document Print Template for Customer Deposits, then you can either mail or print the receipt as required.