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Chapter 17. Recording Liabilities > Accounting for Deposits or Retainers

Accounting for Deposits or Retainers

Depending on the type of business your company engages in, you might receive advances, deposits, or retainers from your customers or clients. Although this money has been paid to you, it is for future services and has not yet been earned. Therefore, instead of recording the money as income, the payments you receive should be recorded as liabilities. After you perform the services and earn the money, you transfer the liability to an income account.

Account for Deposits or Retainers

Select Make General Journal Entries from the Company menu.

Verify that the correct date appears.

Enter the liability account where you record your deposits.

Enter the amount you are ready to transfer to income. This entry should be a debit.

Enter an optional memo.

Enter the customer or client who made the deposit.

Enter the income account where you record the money you earned for this job.

Enter the amount of the deposit or retainer in the credit column.

Save the entry.


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