Hello,

Could anyone help me with the following issue?

We need to send advance payments (prepayment) invoices to our customers

The service ''Advance payment'' was created in Product&Services

Instead of Income Account - a Liability type of account was used for the Service called "Unearned revenue''.

When the Service  was used in our Advance payment invoice to Customer it created accounting records

Dr Accounts Receivable and Cr Unearned revenue

And it is totally fine.

We also tested Sales receipts (it created accounting records DR Checking account  Cr Unearned revenue)

The issue is that this invoice (or Sales Receipt) is displayed in ALL SALES REPORTS but it, is not a sale (income, revenue) it is just a prepayment from our customer, our LIABILITY

Moreover, the system displays it correctly in Profit and Loss  (NO income  and this is correct)  and in the Balance sheet (as short term liability  and it also correct)

So when you have a look at reports they don't match.

P&L income section does not match to Sales reports

Sales reports display Unearned revenue as  Sales  (and this  is NOT correct)

And Profit and loss displays NO Sales (and this is correct)

The same about using any other Quickbooks Sales forms with the Service.

(if we used Sales Receipt or Credit memo) the system displayed the transactions in the Sales report and it did not analyze that there are no  sales, revenue accounting records associated with the forms

The system just analyzed that the sales form had been used (invoice, sales receipt, credit memo) and automatically included the transaction in Sales reports

But what forms should be used to handle customers' advance payments correctly then?

They should not be displayed in Sales reports!

Right now I tested the following approaches

Only if we used Journal entry form 

Dr Accounts Receivable and Cr Unearned revenue then it was not displayed in Sales reports.

Because Jornal entry is not a Sales form

BUT this approach with Jornal entry also does not solve the issue 100%.

When we created an invoice for RENDERED services and would like to apply the advance payment to the invoice we had 2 options as Ituut usually advise.

1) Add the Service ''Advance payment'' with the negative amount to the invoice for Rendered services

OR

2) Create a credit memo with Service ''Advance payment' 'to the invoice.

 Let's assume our Advance payment 1 000 USD in Jan 2022 and our invoice for Rendered Services is 3 000 USD in Feb 2022)

1st error the system included 1 000 USD in Sales reports in January 2022

2nd error the system included the negative 1 000 USD in the Sales report in February 2022

And as a result, our Sales were  displayed as 

1000 USD in Jan 2022

and 2000 USD in Feb 2022

But they must be displayed only as  3000  in Feb 2022. Because we rendered the in February.

This bug is so obvious, and it violates all accounting procedures and standards.

So, to solve it we needed to create the Invoice for 3 000 USD in Feb and again create a reversed Jornal entry for 1000 USD

Only then system created accounting records

Dr Accounts receivable Cr Revenue  3000 USD and 

Dr Unearned revenue Cr Accounts receivable 1000 USD

And only then the Sales were displayed in Sales as 3000 USD as it should be

All other ways , when we used sales forms, displayed 1000 USD in January in Sales reports and 2000 USD in February in Sales report and IT is totally wrong!!!

Moreover, as you could notice from the example above we can not use the Invoice to send to our customer

The invoice should be for 3000 USD which is offset to 2000 USD in Feb 2022 (added a negative amount to the invoice or the credit  memo used) . Because then all this will be displayed in Sales. As 2000 USD in February

But  customer should pay only 2 000 in February. But our total Sales 3000 USD should be displayed in February. 

The unearned revenue should NOT be displayed in any Revenue/income/sales reports.

It is not SALES, revenue, income.

Called  QBO support yesterday and they promised to escalate the concern.

Because right now it does not work properly at all.

It is not some user's preferences or wishes. This is a system bug. When you include the Unearned revenue service to Sales forms then it is displayed in Sales reports without analyzing which accounting records associated with the sales forms (revenue or liability categories)

Again, what forms should be used then instead of Sales receipt or Invoices? 

Journal entries as was described above?

But where should we create customer invoices then? In Excel  :)