Up to now whenever someone paid a security deposit for services, the previous bookkeeper created an invoice and in services they put "Deposit" as if the deposit itself was a service instead of making it a liability.
Then when the payment showed up in the bank deposits, they just matched the payment to the invoice like they would with any other invoice/payment. So now all our past deposits are tied up in Customer accounts as if they were just paying off an invoice. Many of those deposits as invoice/payments have long ago been reconciled too.
In the past, he resolved this by simply editing a customer's final invoice and applying a credit toward it as a line item, saying that it includes the deposit refund in a line item of that final bill, and now they just have to pay the balance.
Now I have just been asked to refund several security deposits where there is no outstanding balance to apply a credit toward, so that method doesn't work. If I use a credit memo or refund, then it seems to still show we owe them $1,200.00.
So, my questions are as follows:
1) How do I best issue a refund for that security deposit in the above example? Should I use a credit memo in this instance? If so, how do I get the account back to show a $0 balance after I send them a $1,200 check? What do I put in the account to show that I refunded that $1200 to them and they no longer have a credit balance?
2) Do I need to create a "check" in Quickbooks? (Dashboard, + NEW, CHECK) And if so, how do I link that to the credit memo so it stops showing them with that negative balance?
3) When that $1,200 refund check I write out and send to them shows up as cashed in my banking transactions page for me to match to something, do I link it to that to the Credit Memo then or to a "check" I created in Question 2?
4) How can I fix other accounts where the Security Deposits were entered as invoices and payments instead of as liabilities? For example, can I delete those invoices (which say they are a deposit) and change the payment (which is linked to the check deposited in the bank account) to instead be treated as a liability? How would I go about correcting those to be logged correctly as security deposit liabilities instead?
(Sorry, I am relatively new to Quickbooks)
