Record customer deposits and advances

Customer deposits and advances are funds received by a business from a customer before they have been earned. While the funds may be present in a bank or cash account of the business, they are actually being held in trust for the customer and represent a liability the business must eventually either repay or convert to income by completion of the economic activity for which they are intended. Some examples include:

Accounting for deposits and advances

Two essential facts must be recorded for every deposit or advance:

In Manager, both facts are recorded simultaneously when the deposit or advance is received. To receive a deposit, go to the Bank Accounts or Cash Accounts tab. Select Receive money in the New Bank Transaction or New Cash Transaction dropdown list:

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Complete the receipt form as you would for any other receipt. Do not select anything in the Item field. Select Accounts receivable and the customer’s subaccount. Leave the Invoice field blank. A quantity is not required, because no inventory items or billable items are involved with a deposit. You may simply enter the total deposit in the Unit price field. However, if you wish, enter the quantity and unit price and Manager will calculate a total amount:

Click Create to finish.

Deposits, even those involving calculations with quantities and unit prices, have no impact on inventory values or quantities because no inventory item is designated.

When receipts are entered under Bank Transactions, no Reference number is generated, because the financial institution usually assigns a reference number. But when entered under Cash Transactions, a Reference is automatically assigned. Manager finds the highest previous integer value and adds 1.

Using deposits and advances

The receipt will now be added to the applicable bank or cash account’s balance. If marked as pending, it will show in the Pending deposits column:

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The deposit also reduces the total Accounts receivable balance, though the effect of a specific deposit may be obscured on the Balance Sheet if there are other deposits from any customers:

To view specific information about customer deposits, you must first drill down by clicking the Accounts receivable balance and locating the customer’s account Balance:

Clicking on the balance, you can see transactions contributing to it, including the recent deposit:

You can do the same thing in the Customers tab, with identical results.

Whenever a sales invoice is created for a customer, any available net credit in that customer’s Accounts receivable balance will be automatically applied, reducing the balance due on the new sales invoice.

Deposits and advances cannot be applied on sales recorded only via cash receipts. Such transactions are not processed through Accounts receivable, so Manager cannot apply any available balance. If you sell to a customer on a cash-and-carry basis, but wish to apply an existing deposit or advance, you must create and receive money against a sales invoice in separate transactions.



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