QuickBooks Online 2021 rental income, customer deposit, invoice and payment. Let’s get into it with Intuit QuickBooks Online 2021. Here we are in our get great guitars practice problem, we’re going to be opening up our financial statements. To start off, I’m going to go to the tab up top, right click on that tab, duplicate that tab, we’re going to do this two more times, right clicking on the tab up top, duplicate the tab, right clicking on the tab up top, duplicate the tab, we’re going to be opening up our trial balance, which will be here, then our income statement or P and L, and then our balance sheet.
And then we’ll be working on the tab at the top right at the front, or to the far left, but it’s cool. If it’s a tab at the top, it just sounds better. But any case, we’re going to be at the tab to the right now we’re going to be going down to the trial balance or the reports down below.
So we can open the trial balance and then in the find area, we’re going to type in the old trusty TB trial balance, trial balance, and we’ll open that one up, scrolling up top range change ending date 1231 to one, run it and then close the burger, hold down Control scrolling back up to that one to 5%. Then we’re going to the next tab to the left. And we’re going to go down to the reports once again, this time opening up the good old P and L Profit and Loss income statement range change up top Indian Point being 1231 to one and running that report, closing up the hamburger up top, back to the next tab to the left.
And we’re now going to open up the balance sheet report. So we’re going to go to the reports down below standard process opening up the balance sheet report now range change up top Indian Point being 1231 31 to one running that report, closing the burger. And there’s where we are at this point.
So now we’re going to set up a system where we have some kind of rental property. In this case, we’re going to ban sets that we’re going to rent. So possibly we set a band set together, possibly, you know, a couple guitars, some drums and whatnot, bass and amp maybe that we’re gonna put together and we’re gonna pretend we’re renting this information.
So it’s a similar process that you would have if you had, you know, rental property if you’re in the business of renting something. And they’re going to be borrowing the equipment and then returning it to us. So if we think about our process, then I’m going to jump over to the flowchart on the desktop version, you don’t need the desktop version, I’m just going over there to look at the flowchart here.
And we’re going to think about a process where we have a rental, the first thing that might happen in this process is someone would say, Hey, I would like to rent this band set for a particular weekend or something like that. And they’re going to request a date that they’re going to want to rent it on.
And we’re going to say, all right, well, to lock it down. In order to lock down that date, we would like to get a down payment or a deposit on that rental property so that we could save it for you for that time period. And then we’ll complete the process of the sale, basically at that time period. So at the point of time that there is a request, then we’re going to hope to receive money at that point in order to reserve the equipment.
So that means that we’re going to get money before we do any work. So instead of us having a invoice or sales receipt, which means we’re going to have the work done before we do the work, which would be an invoice or if we did the work at the same time we’d have a sales receipt, we’re kind of about thinking about a process where we’re going to receive the payment before we do the work.
So we got this one before we basically invoice which is that unusual situation, same situation you would have if you’re doing rental property, and you’re asking for some kind of deposit on the rental property for for money that’s not applied to rent that has actually taken place meaning not applied to usage of the apartment that has already taken place at that point in time. So that’s what we’re going to have first and so we’ll receive the payment and actually record the received payment.
We’re going to do this with the negative accounts receivable type of method. But we note that we have two methods that we looked at in a prior presentations that we could use for, you know, a down payment of this kind. So if you want to go through that, that process to see those two different methods, you can take a look at a prior presentation. But we’ll do it all at one point in this practice problem.
And then of course, we imagined the person coming in to actually pick up the equipment for rental at that point, when we then provide the equipment, that’s when we’re going to basically finish the transaction. So we’re going to create the invoice we’re going to collect the rest of the payment at that point in time. And that will then finish the process of the transaction. And then of course, we can record the deposit in on it.
Obviously, when they pick up the equipment, we might want some other kind of security deposit to make sure they bring the equipment back or something like that, which is which is kind of another kind of prepayment, or unearned revenue, but we’re not gonna be able to keep that revenue that’s just going to be basically a debit to cash and then basically a liability at that point that we’re going to have to pay back. And that would be similar to like a security deposit on a rental property but we won’t get into it. into that component of it. In any case, let’s go on back to our our QuickBooks Online.
And so we’re going to set up then another item for the sale that we’re going to have. So let’s go back to the first tab. And let’s think about this as a new source of revenue for us. So I’m going to go down then to the sales item, which is kind of like the revenue cycle, the customer center, I’m going to hold CTRL down, scroll down a little bit, we’re at the 110, I’m going to go to the Products and Services tab, these are the items that we sell that are going to be populating the invoice and the sales receipt, we’ll create a new one, this time for basically our band set.
Now note, if you’re renting things like band sets or something like that, then once again, you’ve got this kind of issue as to how are you going to set up the rental property and you want to really kind of think about that, to make it as easy as possible to populate the invoice and to market it and to talk to other people about it. Because for example, you could say that I’m going to have a different rental for every piece of equipment, and you can put together any kind of kind of package that you would like to do.
But obviously, when you do that, you have to track each individual piece of equipment separately have a separate item for them, batch up the invoice in a particular and custom way, you know, every time and when you advertise it, it’s a little bit more difficult to talk about or tell other people how to talk about, then if you say, Hey, here’s my standard package deal, you know, it’s got two guitars, it’s got two amps, it’s got a drum set, and whatnot, and, you know, microphone, whatever, and you have it all in one package deal.
So whatever you’re doing, you want to think about how you’re going to set up your items to make it as easy to populate your invoice as easy to talk to it to somebody else. And, and and market, what you’re what you’re doing. And sometimes packaging things together could be a way to do that. But in any case, We’re then gonna say where it’s gonna be a service type of item. And I’m just gonna call it band, we’ll call it band set number one, so band set number one.
And so that’s just so it’s this package kind of band set here that we have that we rent. And then the price on it, we’re gonna say is 1500 for the band set that we’re renting, and then we’re gonna say we could take it to this service income. But again, this is a whole nother kind of category of income.
So we might want to make another account for this item. Now, we would not make another account for every different kind of rental property, like I wouldn’t make another rental account for, like the guitars versus the drums or anything like that most likely, but a whole different category of rental income is somewhat different enough that I might want it actually on the front of the income statement. So I’m going to then say, Let’s add another account, income account.
And I’m going to say it’s an other primary income and I’m going to call it rental income rental income, save it, close it, there’s our rental income, is it taxable? No, because it’s, it’s a service type of thing. So we’re gonna say not taxable. So we’ll say save it and close it. So there is our our item that we can then sell. So where is it here somewhere, because there it is the band set number one, you want to rock and roll Trier band set number one thing, and you can, so then we’re going to then set up and say that when someone comes in, it’s gonna, it’s gonna want the band set, they’re gonna say, hey,
I want it as of this particular date, we’ll make this whole transaction basically as of the same day or a couple days to make it nice and easy here, but they’re gonna say, hey, I want this band set. And we’re gonna say, Okay, we got to give us a down payment for it, and so that we can lock you down for that date. So that’s going to be our pre payment. So we’re going to get the pre payment. Now a couple ways we could do this, we could actually enter the pre made payment, which basically makes it negative receivable, which logistically works well.
Or we can basically set up the item that we saw last time. In a prior presentation when we talked about the couple different methods we can do for this and and work it so we have an item so that we can create an an undeposited funds go to the undeposited funds account.
there’s pros and cons to each method, I’m going to use the negative receivable basically method here. So I’m going to go to the first tab and I’m going to then use the form and this method is nice because you use the form then that makes sense, which is the receive payment form or or receive payment form which is going to be here. That makes sense because we’re receiving a payment.
The funny thing about it is we’re receiving a payment and not applying it to an invoice because we’re getting the payment before the invoice but we know that this payments gonna attach this to the invoice eventually and this is going to be for john smith wants the guitar set wants to rock and roll at some point in the future.
So we’re going to then say Save, and it’s going to say I’m paraphrasing, hey, you don’t have any invoice for that because there’s no invoice down here and we’re gonna say that’s okay. Because it’s a prepayment, it’s part of the plan. And then we’ll make this as of Oh to, let’s say 2727 to 102 27 to one, and we’ll just call it a cash down payment, it’s going to go into undeposited funds.
So what’s this going to do? When we record it, if I put an amount over here, we’re gonna say it was for $150, it’s going to be increasing the the accounts received, I’m sorry, it’s going to be increasing undeposited funds and decreasing the accounts receivable. However, it doesn’t have any invoice to match out to the accounts receivable. Therefore, for this particular customer, due to it being a new customer, john smith, and having no other activity in the account, we’re gonna have a negative receivable for that particular customer.
So let’s go ahead and say save it and close it, save and close it. And once again, it’s given me that same message. So I’m going to say yeah, that’s what we want, we want to credit for that customer. And then we’re going to go up top to the balance sheet, refresh the report. So we’re looking at fresh stuff. And then in the accounts receivable, we go into the accounts receivable and scroll down, and we have what the the payment would typically do.
And that’s going to be a decrease right there, john smith, for the 150. But there’s no invoice that applies to our accounts receivable in total, then still positive. But we have that negative amount that doesn’t really apply out. That’s kind of funny. So how do we know it’s kind of funny, because we can then look at the accounts receivable by customer, let’s do that, I’m going to jump to the report to the end, right click on it, duplicate it, so we can open another tab.
Because now we’re looking impressive here. Now we’re diving deep, because we’ve got five tabs open, that’s when you know, people know what’s going on around here. So then we’re going to go down to the reports down below. And then we want to be opening up the customer, the customer reports who owes you. So I’m going to go to the reports for who owes you money. And we want to go to the customer balance detail the customer balance detail. And we got all dates.
So I think that’s good. And so now we had john smith, so we should have a negative balance here. There it is. So now that string music has a negative balance, that one was already there, here it is. So that negative balance for this particular customer, not that balance, not matching up to any other invoices are indication that there’s a negative receivable. And once again, there shouldn’t be a negative receivable generally, because what we should have is a positive liability rather than a negative receivable.
But the negative receivable works well, because it allows us to work within the customer center so that when I create the invoice, it’ll match out automatically to the receivable that is already there. If it’s still outstanding at the end of the time period, I need to make my financial statements, then we’ll need to make an adjusting entry in order to account for it to make the financial statements correct on an accrual basis, as we will see in the adjusting entry process not with this 150. But with this 304 string music down below the total down here. 13 323 is of course positive.
And that ties out to what is on our balance sheet at the 13 323. The other side went to the undeposited funds, there’s the 150 in the undeposited funds. So now we’re going to imagine that john smith comes in is going to pick up the band said it’s time to rock it’s time to roll. So we’re going to go back to the first tab they’re picking up.
So we’re kind of completing the process, we’re gonna imagine this is the completion of the process here. So if I go back to my flowchart on the desktop, you don’t need the desktop version, just looking at the flowchart here, then we’re going to go back, we’ve got the receipt payment, now we’re going to make the invoice and basically complete the transaction here.
So we’re going to go all right, now they came in to pick it up. So we’re finishing the transaction. So I’m going to go up top. And we could do this a couple different ways we could go down to the sales tab. And we could say, Yeah, he’s gonna say i’m john smith picking up the guitar set, we can go to the customers and say, All right, let’s find you here in our customers, john smith.
There you are, and that you put down the down payment of 150. That looks good. And then we can create the invoice here if we would like or we could just jump up top and say, All right, let’s see what we have for you. Opening up the new tab invoice. And then we could go down into the john smith here, john smith, and we could say yeah, I see you’re a customer. That looks good.
Let’s go through this. We see the 150 was already you know something that’s outstanding. You’re picking up a band set. So band set number one and band set number one for 1000 $500 Now note that the credit doesn’t apply to the invoice automatically. At this point, we can’t see it right now. But if I record it, then it should then match out what the credit is already outstanding would be.
So this is going to record them this invoice when I record it is going to be increased in the accounts receivable but and when it does, it’ll match up to the credit that is already there, the other side then go into the the income account now driven by this item, which is the rental income. So let’s let’s save it and then check it out. We’re gonna say Save and Close. So save and close.
And then and then now if it didn’t match out, if these two things kind of didn’t match out here, I’m in his items, then then we’d have to go, we’d have to match it out ourselves, right? We’d have to go Okay, now I’m going to go to my received payment items. And then we would go to john smith, john smith. And then we’d have these two items here. One would be the invoice one would be the payment. But we don’t we don’t have the payment right now because it’s been matched out at this point.
So now you can see, it’s already applied out that that 1350 was the only balance remaining or in other words, if I go to my, we could find it this way here if I close this out here, and I said do you want to leave? And I’m going to say yes. If we then go to the john smith after recording the invoice and we see there’s the invoice. If I want to open that invoice up, I just opened the invoice backup at this point. And I opened it up twice. So now it’s now it’s gonna think, Okay, I think I confused it.
But there it is, it was opened in a little slow and I got a little frustrated there. But any case there we have there, we have the invoice. So there’s the 1500. And now you can see the 150 has been applied out to it. So there’s the remaining balance. So we can say okay, now you owe us this 1003 50 you can print it out and provide that, you know, to them at that, you know, 1003 50 is now owed and then we can collect of course the payment on that which would go through the standard kind of collection process at this point in time for the remaining 1003 50 that is still left.
So if I close this back out, let’s check out what we have on the financials. Now we’re going to go to the balance sheet report, run the report again. And then if we go down to the accounts receivable, and then I’m going to scroll down, hold down Control go down just a bit. Here’s the two items, we had the deposit that came first, the deposit first on the 20. And then the invoice that happened right after that point in time, I was going to use different dates, but that’s okay, I’ll keep it on this date.
And then if I go back up top, and I go back to the balance sheet, we can then see the accounts receivable detail by customer go into the report all the way to the right, we’re going to make it fresh, freshen it up, throw it in the microwave. And then we’re gonna go down and say that we have this one was for john smith, john smith. So now we just have the invoice outstanding. If I want to see the detail here, which I do, I’m going to go back up and customize.
And then I might say let’s go down to the filters down here. And I’d like to see all the activity. So I might say that I want to see not just the unpaid but like everything, give me give me everything and run the report. And then we’ll scroll back down again. And there it is. So now we have now we have the payment that happened first, and then the invoice applied out the amount that is still outstanding, the 1350.
And we could see that it did that 150 did apply out to that invoice, bringing the amount that’s open down to 1350. Now of course the other side of this transaction went to the income statement, which is on this tab. Let’s freshen up that report. That’s he did a hold down Control scroll up just a bit, then we have another kind of category up top for the rental, the rental income of that 1500.
So we’ve got kind of a lot of categories up top. But notice there not too many I didn’t make another category for every kind of rental This Is Us renting guitars versus drums and whatnot, that would be too much detail. But breaking out a full category. If we have another kind of income type or income source in general, such as rental versus Guitar Lessons versus service like tuneups, or whatever we’re calling those, then that might be worth the added breakout.
But you want to be careful not to add too many income items on the income statement because you do have the supplemental reports to give you the added detail. So now let’s finish the process and record the receipt of the payment. So go back to the first tab I’m going to go back to the sales item and we could say all right, so now of course if we look at john smith here And the OSP 1500. So I can, I can then say I need to get the payment.
So I’m going to collect the rest of it, which is that 1350. So I’m going to say, let’s go right from here and say received payment received payment to get the rest of it. And so I’ll keep it at the 20 27th. And I’ll just call it cash again, it’s going to go into undeposited funds, they owe us the 1003 50 left of the original 1500, after having applied out the down payment.
So we’re going to say that we collect that what’s going to happen when we do this, it’s going to be increasing undeposited funds, other side going to the decrease of the accounts receivable. And then of course, the sub account for john smith, then going back down to zero, they can, they’re all paid up, and they can go rock and roll without the debt over, you know, hanging over everybody’s head.
So then I’m going to go so if we, if we scroll back down, now of course, we’re back down to zero down here, we’re going to go back to the second tab. And let’s run this report again. And then if I go into the accounts receivable here, we’ll scroll on back down, scrolling on back down. So now we’ve got john smith, in three, three times, so down payment, then invoice, then you know, then they paid off the balance of it. So that looks correct.
Back to the prior tab, then the detail of that reports can be on the last tab. And let’s heat that one back up, run the report. And then we’re going to go down to john smith here. So now we’ve got the next payment happened, they’re back down to zero. So here we got the original deposit invoice next payment brought back down to zero. And then if I go back to the to the balance sheet, the other side is of course in undeposited funds. So undeposited funds. Now this is the income statement.
It’s not that’s not where the undeposited funds is on the balance sheet. undeposited funds now has that 1500 in it. That’s happening from those couple transactions here those two payments. Scrolling back up, that looks good gonna go back, no effect on the income statement from the receipt of the payment because we recorded it when we hit enter the invoice. So that’s where we stand at this point.
Let’s go on back over to the trial balance and warm it up and we can just check out where we stand at this point. I’m going to hold down Ctrl scroll up a little bit back to the one to five. And this is where we are at this point I’ll try to print these out so you can also check them if you’re following along on your own time.