Hi TCF,

You are correct.  The deposit is a liability until the guest checks out, then it becomes income.  This is the way it should be handled:

1) Invoice the customer for the deposit and post it to your liability account.

        Accts Rec.          DB  $25.00

        Liability Acct        CR               $25.00

2) When the customer pays, deposit it in the bank and apply it to the invoice.  

        Bank Acct           DB  $25.00

        Accts Rec.         CR               $25.00

3) When the customer checks out, invoice for the full amount, and subtract their deposit.

        Income               CR               $100.00

        Liability Acct       DB  $25.00

        Accts Rec.         DB  $75.00

4) When the customer pays, deposit it in the bank and apply it to the invoice.

        Bank Acct           DB  $75.00

        Accts Rec.         CR               $75.00

5) What if the customer doesn't show up?  Generate another invoice.  The first line would be a charge to income and the second line would be a credit to the liability account.  The invoice amount will be $0 but the correct GL accounts will be affected.

        Income               CR               $25.00

        Liability Acct       DB  $25.00

I hope this helps.

Hi TCF,

You are correct.  The deposit is a liability until the guest checks out, then it becomes income.  This is the way it should be handled:

1) Invoice the customer for the deposit and post it to your liability account.

        Accts Rec.          DB  $25.00

        Liability Acct        CR               $25.00

2) When the customer pays, deposit it in the bank and apply it to the invoice.  

        Bank Acct           DB  $25.00

        Accts Rec.         CR               $25.00

3) When the customer checks out, invoice for the full amount, and subtract their deposit.

        Income               CR               $100.00

        Liability Acct       DB  $25.00

        Accts Rec.         DB  $75.00

4) When the customer pays, deposit it in the bank and apply it to the invoice.

        Bank Acct           DB  $75.00

        Accts Rec.         CR               $75.00

5) What if the customer doesn't show up?  Generate another invoice.  The first line would be a charge to income and the second line would be a credit to the liability account.  The invoice amount will be $0 but the correct GL accounts will be affected.

        Income               CR               $25.00

        Liability Acct       DB  $25.00

I hope this helps.

I post the deposit as a payment on account and I do not have it linked to prepayment - the deposit is entered under the customer name in Acct Rec Receipt module and the coding is Dr bank and Cr A/R

When the customer arrives then an invoice is created for the booked period. The customer will pay the difference between the invoice total and the prepaid amount.

If the customer cancels then an invoice is created for the amount of the deposit to revenue and also showing the taxes. If cancelled deposit was 160.00 then dived by applicable taxes and code to revenue with the rest coded to the taxes. The date would be the date the customer cancelled.

this way you can run an AR aged listing and see who has prepaid and not arrived yet to verify that they have not cancelled booking and are still coming.

If the prepaid deposit carry past the Year-End date then you would need to make an entry to record these into prepaid liability account as of last day of Year-End and reverse this entry on the 1st day of new Fiscal year.

Thanks everyone! I will go through these a little more closely today and see if I have any more questions

TCF: I like smithco's idea because you can run the aged listing and see who has prepaid and not arrived.

Thanks everyone!  I marked Jenn's answer because it's what I need a the moment but I'm logging Smithco's idea away for next season.