No problem. I just hate to pay taxes early myself so assume others do too. So if deferred revenue was common or majority of my business, I would want to do accrual-basis accounting to be able to pay taxes on that money in the next year. Unlikely your CPA would tell you this since that would be more work for him or her (many do not even recall accrual-basis accounting from what I see).
I assumed you were the biz owner, where most I work with are pretty picky about overpaying tax.
In my business, I teach accounting to small biz owners so I hate to see folks get half answers even if they only want to know minimum to complete a single transaction because that usually leads to confusion and problems later. I know this since most of my clients start out with huge mess in QB.
@AGMAIN wrote:
"We are actually doing cash basis for both accounting and taxes".
This is the part I wanted you to understand since I raised the question to begin with.
Even if you don't know what that means, you should be aware there are differences.
"Unfortunately it seems that the "customer deposits" should not be going to a liability"
Right, not if you are doing cash-basis, since then you must count in the year received.
"It is just set up wrong in Quickbooks. It was set up this way before I started working here"
Not sure if QB or your predecessor did, but it is (was) setup for accrual-basis accounting.
"I will be trying to figure out how to fix it so everything records properly." Get some help.
QB Teachment sent instructions for how to make this work in QB so he probably knows.
"hopefully I won't have to worry about moving it around at the end of the year!"
This is where I hate to leave you with half information. It is not that you would normally "move this at year end." You must move it now because it is wrong for cash-basis.
Deferred revenue (only exists on accrual-basis) and is normally moved from liability to sales/revenue (income stmt) as earned. (QB terminology differs from most accounting).
Thank you for your replies it has helped me have a better understanding of the way it should work.
