Summary of Accounting for customer deposits?
- What type of account is customer deposits?
- What are the 4 types of deposit accounts?
- What is a consumer deposit account?
- What is a client deposit account?
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AI Overview
AI Overview
Customer deposits are treated as a current liability on the balance sheet because they represent payments received for goods or services not yet delivered
. Record the receipt by debiting Cash (Asset) and crediting a Customer Deposits account (Liability). When the service is provided, debit Customer Deposits and credit Revenue.
Accounting Steps for Customer Deposits
Receipt: When receiving money, debit the bank account (Asset) and credit a liability account (e.g., Customer Deposits or Unearned Revenue).
Recognition: Once the goods or services are delivered, reverse the liability by debiting the Customer Deposits account and crediting the Sales Revenue account.
Refunds: If the deposit must be returned, debit the Customer Deposits liability account and credit the Cash account.
Key Considerations
Classification: It is a current liability because it is generally settled within 12 months or less.
Purpose: It acts as a safety measure, as the company does not technically own the money until the service is rendered.
Tracking: It is essential to track these deposits by customer to maintain accurate, detailed records, often managed through QuickBooks.
Non-refundable vs. Refundable: In accrual accounting, even non-refundable deposits are generally treated as a liability until the service is performed.
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So I see there are Customer Posting Groups, which handle the account code mapping for the AR side of things. For example, a customer purchases an item using an in-store charge account. So the customer owes us the balance. Makes sense. See an example below of something defined this way.
Looking in BC 19 I do not see how we account for customer deposits. For example, a layaway deposit, a special order deposit, or in-store credit. Can anyone speak to how this is handled in BC? Hopefully it’s not just lumped into AR as basically a “flipping” of the deposit amount being seen as a positive, whereas the in-store charges would be seen as a negative.