How do I handle trust account payments with Wave?

wynnelwynnel Member Posts: 5

I have two accounts - a trust account and an operating account.

When I process credit card payments, they go through the operating account and then are transferred to the trust account. These payments are NOT income until I remove them from the trust account when they are earned, which occurs later on . My questions are as follows:

1) How should I categorize these payments in Wave when they are deposited into my operating accounting (currently categorized as income)?
2) How should I categorize these payments in Wave when they are withdrawn from my operating account to my trust account (currently categorized as expenses)?

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Comments

  • SophiaSophia Administrator Posts: 147 admin

    Hi @wynnel, am I correct in understanding that your customer pays you a deposit or retainer via credit card, and then you transfer that money to your trust account, to be held in trust until the work is performed and the income is earned?

    When the money shows up in your operating account, I would categorize the funds as a customer prepayment or credit (you can find this under Liaibilities). This is because, as you note, the funds are not income until the work is performed.

    Then, when they are withdrawn to your trust account, you can mark the movement as a transfer. That said, depending on your profession and where your business is located, there may be more complex requirements for how to account for these things, so I'd recommend speaking with your accountant to ensure your bookkeeping is compliant :)

  • wynnelwynnel Member Posts: 5

    @Sophia That is correct. The categorization of the incoming cash as a liability makes sense. But there are two transactions each time a deposit is made - 1) The incoming deposit transaction; and 2) The transaction created when I move the money from the operating to trust account. How do I categorize the transaction created when I remove the money?

  • JamieDJamieD Administrator Posts: 675 admin

    @wynnel If you are simply moving money from one account to another (funds leaving the operating account to the trust account) all you will need to do is categorize this as a 'Transfer From' the specific account you are moving it to. This is the proper way to account for this in Wave.

  • wynnelwynnel Member Posts: 5

    @JamieD I see that Wave offers a "Transfer to bank, credit card, or loan" option. Where do I find the "Transfer From" category?

  • SamdSamd Administrator Posts: 513 admin

    Hey @wynnel this should show up on your Accounting > Transactions page when recategorizing. It should be one of top few options that act as a function more than a category (such as refund, payment, etc). That being said, if you're on the original version of Wave, you'd be able to transfer a transaction by checking the transaction you're hoping to transfer, followed by the transfer option in the top of the menu.

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