Don't understand how to use "Liabilities & Credit Cards" section...

cyphix333cyphix333 Member Posts: 33

Hey guys, recently started using Wave and I have been looking through the "Chart of Accounts" section and since I recently received a deposit from a client it sounded like it belonged in the "Customer Prepayments and Customer Credits" section within "Liabilities & Credit Cards"; however when I go to add Income I don't see this as a category (I have added an account within it).

I did a search and only came across this: https://support.waveapps.com/hc/en-us/articles/208622916-How-to-handle-invoice-deposits-or-pre-payments

...which doesn't mention anything at all about that section?

Edit: Weird, now that has shown up and I can add stuff to it. But I guess I'm still curious what the different is between using the category I mentioned and what is explained in the article?

Also, should you still use this section if your deposits are non-refundable?

Cheers!

edited July 11, 2018 in Accounting

Comments

  • AlexiaAlexia Administrator Posts: 3,315 admin

    Hi, @cyphix333.

    It wouldn't be a liability account because it isn't money that you owe. Liability accounts are their account types (like income, expense and asset). The short definition of all of those are...

    Income: What you gain
    Expense: What you spend
    Asset: What you have
    Liability: What you owe

    Whenever you record a transaction, it credits one of those accounts and debits another. So for a deposit, Wave will credit your "Deposit Holding Account" (which is income) and debit your bank account (an asset)

    The income you'll record won't be assigned to an invoice yet, but it is still income, so it should be recorded as such.

    The deposit being non-refundable doesn't affect anything in Wave.

  • cyphix333cyphix333 Member Posts: 33

    Thanks, but I'm, still a little unsure what the difference between the method shown at that link is and the other one.

    The method shown at the link is under "Income", however when you look under "Liabilities & Credit Cards" there is the section called "Customer Prepayments and Customer Credits", with the description as:

    Use this to track the value of the product or service that you still need to provide to a customer because they made upfront payments to you. An example is when a customer gives you a deposit or a retainer, or when you give a customer a credit note. The balance of the category will decrease overtime as you provide the product or service to the customer.

    Now I understand that a non-refundable deposit isn't a liability, but wouldn't refundable deposits be a liability and belong here then?

  • AlexiaAlexia Administrator Posts: 3,315 admin

    Hi, @cyphix333.

    Where do you see that paragraph? I can't seem to find it on my end. You are right to point out that our suggestion to use an income account in the article while there is a pre-payment account type under is confusing. I'll bring it up on my end immediately.

    If the payment is a deposit that is meant to be paid back in full after the fact, I would recommend recording it as a liability, since that money will absolutely be repaid (in the case of a safety deposit for an apartment, for example). If the deposit is meant to be an early payment for the invoice, you can record it as income, since it will essentially just become a partial payment for that invoice later down the road. If you end up having to refund it for one reason or another, you'll still have the option to do so.

  • cyphix333cyphix333 Member Posts: 33

    Thanks @Alexia :)

    The paragraph is found by clicking the question mark icon next to the header text "Customer Prepayments and Customer Credits".

  • AlexiaAlexia Administrator Posts: 3,315 admin

    Perfect! Thank you for your help @cyphix333!

  • jpenixjpenix Member Posts: 1

    Liability is the correct way to think of retainers and such, because you are holding money for services not yet rendered. I'm trying to account for this exact situation, and I'm glad to see the introduction of the "Customer Prepayments" section in Liabilities.

    What's not clear to me how to invoice against money in this account. I can't just reclassify the deposit transaction to a single invoice, because the retainer is larger than I'll bill for in a single month. Ideally, when creating an invoice I'd be able to add a line that debits the "Customer Prepayments" accounts to offset the cost of the other items on that invoice, but that doesn't currently appear possible.

    Can you provide guidance?

  • AlexiaAlexia Administrator Posts: 3,315 admin

    I can absolutely help you there, @jpenix!

    When you click a transaction, on the Transactions page, you'll see a button on the panel on the right that says "Split this transaction". Click on that and split the transaction into as many parts as needed. You'll be able to assign portions to specific invoices, and leave what as yet to be invoiced into your holding account.

    You can split your transaction later down the road as needed for your other future invoices.

  • MarcoRNRVMarcoRNRV Member Posts: 1

    @Alexia
    Are you able to split a transaction that has been made automatically by wave because it was paid online using a credit card through invoicing? For the same reason as above. >> I am trying to utilize your invoicing and merchant services (VISA/MASTERCARD) to handle my damage deposits, which I later return, but am unable to classify the payment as a liability or split the transaction to make it a liability rather than an income (because "Transactions that are automatically created in the Wave system can't be edited or deleted.")

    edited February 4, 2019
  • glargoglargo Member Posts: 3

    Hello @Alexia, I have a doubt here.
    My sales take around 10 weeks, so I receive a Downpayment at the beginning and I'll receive the remained amount when the job is done. I have to register the downpayment usually bank against credit note, but I tried your method of do it against a Liability - Downpayment account ( at this point everithing is ok). When I finish the job, I recieved the last payment, in this moment I create the Invoice and associated the this last payment directly from categorize -> Set Payment to Invoice created by Waze (it works perfectly) but when I tried to charge the first payment ( categorized under Downpayment Account) I couldn't do it. I have to do this because I am not interest in report a sale before to complete the job.

    Could you help me with some procedure to do this?

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