Struggling with Invoicing Prepaid Service

Kevin Davison kdavison at cyber-wizard.ca
Mon Oct 12 15:42:56 EDT 2015



On 10-12-2015 6:38 AM, David Cousens wrote:
>
>
> On 10/11/2015 10:55 PM, Cyber-Wizard wrote:
>> I've been using Freshbooks for invoicing and expense tracking for my
>> consulting business. It's time to move to something more full 
>> featured. As a
>> longtime Linux user, GnuCash is the obvious first choice. I'm testing
>> GnuCash 2.6.6 out now on Windows 10.
>>
>> Many of my customers prepay for my time in blocks so I need to issue 
>> them an
>> invoice upfront and deduct from the paid amount as I work. I think 
>> that I
>> have the prepayment aspect working correctly but I'm struggling with 
>> Invoice
>> payment.
>>
>> When I create an invoice, 13% HST is added on to the invoice 
>> according to
>> the tax table. For the sake of even numbers lets say the invoice is for
>> $5000 + $650 in applicable taxes. When I post the invoice I get $5000 in
>> Assets>Accounts Receivable
>> $650 in Liabilities>HST
>> This makes sense to me.
>>
>> When I receive payment. I would like to have the $5000 go into
>> Liabilities>Unearned Revenue but I'm uncertain what to do with the 
>> remaining
>> $650. Receiving payment of the posted invoice puts all $5650 into the
>> Transfer account that I choose during the payment process. Obviously my
>> customer shouldn't have the full $5650 at their disposal, but I'm 
>> uncertain
>> what the logical steps would be to relocate that $650. I think my 
>> question
>> is probably more of an accounting issue than a GnuCash issue but I 
>> suspect
>> that I'll get better information here than elsewhere. Can anyone 
>> offer any
>> advice on how I should more appropriately receive payment on an invoice?
> If the payment is initally recorded as the total amount of $5650 to 
> the Unearned Revenue account then you could open the transaction to 
> that account and modify the transaction by adding an additional split 
> so that the $650 for the HST is placed into your main bank account and 
> the amount transferred to the Unearned Revenue account is reduced to 
> $5000 and the credit to your Accounts Receivable is for the full 
> amount of $5650
Excellent! That put me on the right path. Thank you very much.

I started working in my sandbox copy to do a little trial and error 
based upon your recommendation. The final solution was to set the income 
account, when issuing the invoice, to Liabilities: Unearned Revenue. 
That puts $5650 in Assets: Accounts Receivable, $650 in Liabilities:HST, 
and $5000 in Liabilities:Unearned Revenue. When I processed the invoice 
payment I set the Transfer Account to Assets:Current Assets:Business 
Chequing Account. That clears the $5650 from Accounts Receivable, puts 
the $5650 in Assets:Current Assets:Business Chequing to properly reflect 
my "real world" numbers and let me reconcile correctly, and leave $5000 
in Unearned Assets and $650 in Liabilities:HST.
Now I just need to wrap my head around the logical process of moving 
thinks from Unearned Assets over to Income.


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