Question: I am a new horse trailer dealer and I take deposits on custom trailer orders. Once the deposit is received I place the order with the Manufacturer. Several weeks later the trailer is delivered and we invoice the customer. I need to know how to record the invoice for the deposit and how to invoice the customer at delivery.
Answer: First create an new item called "Deposit on Trailer" and make the item type either Service or Other Charge. From a QuickBooks perspective, these two items are exactly the same. This is just Intuit trying to "help" end users with their choices. Make the Tax Code Non-Taxable Sales and enter "Due to Customer" in the Account field. The Due to Customer account should be an Other Current Liability in your Chart of Accounts.
When you're ready to invoice for the Deposit you will choose the "Deposit for Trailers" item and record the amount due. In this example we'll assume a deposit of $5000. The accounting behind the scenes is a debit to Accounts Receivable and a credit to Due to Customer.
Let's assume this horse trailer's selling price is $50,000 and the customer will take delivery out of state so there is no sales tax on this invoice. When you're ready to create the final invoice you choose the appropriate Inventory Item and add the price of $50,000.
On the next line choose the "Deposit for Trailers" item and add the deposit of $5000 you took earlier. The key is you record this line item as a negative $5000 since this amount must be netted against the total due. When the invoice is recorded a debit of $5000 will hit your "Due to Customer" account netting this account to zero. The trailers revenue will be properly recorded as a $50,000 sale and Accounts Receivable will show $45,000 due.
If you're ever unsure of the accounting treatment behind the scenes you can always click on the "Reports" tab at the top of the transaction. Then click on "Transaction Journal" and this will bring up the journal entry that is populating your financial statements. It's that easy!