Accounts receivable vs income
How do I change payments received from accounts receiveable to income?
How do I change payments received from accounts receiveable to income?
If you use items on your invoices that point to income, they will record to income once payment is applied (or at the time of the invoice) depending on your reporting preference (cash or accrual).
I have everything going to the sales income category and when I get a payment I use the recieve payments icon then type in the amount. The payment shows in the register but it puts it against the accounts receivable. Even if I run a report it shows all the money in the accounts receivable, but if I run a sales income report it shows it in their too.
That is the flow. If you did it by journal entry (not recommended) but so you can understand the flow:
when you invoice.
When you receive your customer pymt. it credits a/r
debits your bank acct (or undep funds then bank acct).
QuickBooks is a double entry accounting method.
When you run a profit and loss statement, it will show the income at the time of the sale (invoice date), if you run the report on an accrual basis.
If you run it on a cash basis, the income will show at the time of the customer payment.
The flow thru a/r will show on the balance sheet report.
Here is a similar discussion already ongoing, see if this helps:
Open your Chart of Accounts and tell us if you are seeing Undeposited Funds and, if so, is there a balance?
Here are your issues:
"I have everything going to the sales income category"
What is "everything" and how do you use it? Are you using Items on a Sales Receipt?
"and when I get a payment I use the recieve payments icon then type in the amount."
That is the process to use if you have been creating Invoices. Invoices are unpaid sales, so the items post to income but the amount still waiting to be collected by you is seen in AR.
"The payment shows in the register" which means you have the payment posting directly to the bank account. If you are using Sales Receipts, these can either be doing the same, or perhaps flowing into UF and waiting for you to select them by using Record Deposit. This is how you would batch the daily total deposit of all customer activities. This is the destination of the money and has nothing to do with Income. Income happened two steps earlier.
" but it puts it against the accounts receivable."
Of course, it does, because that is the function: receive a payment against an unpaid sale, and now it is a paid sale. You don't use Receive Payment if you don't use Invoices for your customer sales.
I do not have a balance in Undeposited Funds. I do have a balance in Account Receivable.
I create invoices and send out the bill. When I get a check in the mail and deposit it in the bank I receive the payment in quick books which does post to the bank account and show up in A/R.
So are you saying now I have to somehow receive it again to post as sales income or is the A/R quick books way of showing income?
No you are doing it properly. Create an invoice, record the payment. Use an item on the invoice that points to income. You have the proper flow. No other transaction is needed (unless you use undeposited funds, then you go to banking>record deposit and group your deposit to your bank acct).
My accountant doesn't used quick books software and said that all the payments should be showing as income so that is how this mess got started. If accounts receivable is the same as income then I guess there is nothing else to do. I guess I should have started with that question and saved everyone a lot of time. Thanks for all the help.
Your accountant may think that you are using the Cash Basis.
On the cash basis there are no accounts receivable, per se...you make the deposit and you credit Income.
You are using the Accrual system...much more accurate and sophisticated. Tell him that you are usining the accrual system...he can make a few adjustment back to cash for income tax filing if he wishes....if that doesn't clear the issue up, you need to find a new accountant...
This is very basic accounting and if he does not understand this, he is no accountant.
I tell it as I see it.
It would seem the accountant has misled you (and us) into thinking there is something wrong.
It is not unusual for an accountant who doesn't know QB not to understand how the program flows the data to the accounts.
Run your P&L and Balance Sheet on an accrual basis and on a cash basis, so the accountant can understand the difference.
Payments are not by definition equal to Income. That is where the accountant has gone wrong.
Sorry...but maybe because I am an accountant I am less forgiving...this is accounting...pure and simple. Whether it being done on and old fashioned paper entry system , Quickbooks or whatever, he should have been able to figure this out ...quickly.
I only had a short amount of time to sit down with my accountant and we were mainly discussing other items. I only get to go every couple months so far as I am a new business and trying to do it all on my own because I can't afford an accountant's rates. She has been in business over 20 years so I think she will be able to figure it out, I am just trying to do what I can to learn and make things easier come tax time without going all year doing something wrong. Thank you all for your help.
Just to beat this dead horse into the ground and to clear up how the accounting works here.
When you click the INVOICE icon on the home page and fill out the screen, quickbooks puts the amount you entered into Income AND into Accounts Receivable (double entry accounting). Accounts Receivable is the account that keeps track of what your customers owe you. You can run reports under the Reports > Sales and Customers > A/R Aging Detail menu to see what is in that account.
The next Icon directly to the right of the INVOICE icon is the RECEIVE PAYMENT icon. In this screen you record the payment check information (or cash or credit card) from the customer and this removes that amount frrom accounts receivable and puts it into your bank account or undeposited funds (depends on your company file preference settings). This is why the payment information referes to the Accounts Receivable account. You already recorded income on the previous screen.
I think we have all "beat this dead horse to the ground" on this one. LOL
Just to clarify this a bit more: "quickbooks puts the amount you entered into Income AND into Accounts Receivable"
Isn't exactly true.
QB puts the amount listed on an Item into the the account linked to that item, and this is how you control the flow of the data to the accounts. This is based on the Transaction Type, too, so when used on an invoice, the item flows the data to income or liability or whatever account the item is linked to, as the "income side" or "credit" side of the accounting transaction.
To be briefer in my response, I assumed that the user had setup an item linked to income as they had earlier stated that they "had everything categorized as sales income".