How to Set Up Deferred Revenue in QuickBooks?

Deferred revenue is considered a prepayment for goods/services awaiting delivery. In the QuickBooks program, deferred revenue is registered as a current liability. Precise monitoring and acknowledgement ensure correct financial reporting. In addition, it ensures adherence to accounting regulations.

QuickBooks monitors costs, revenue, and other accounting information for businesses. It empowers users to generate detailed accounts and item records. However, it fails to offer a simple option to add a deferred revenue item.

This guide talks in detail about deferred revenue in QuickBooks. It includes methods to record deferred revenue in QuickBooks Desktop and Online.

What is Deferred Revenue?

Deferred revenue is a deposit acquired for goods/services pending delivery. It is considered a liability since a balance is owed to the customer. After the goods/services are delivered, it turns into earned revenue. This earned revenue is displayed on the income statement.

For advance payments and subscription-based models, deferred revenue is the standard choice. It ensures income is accurate by identifying revenue when earned. Monitoring it displays your commitments to customers and aids in predicting future income.

Furthermore, right management ensures adherence to accounting standards. It creates trust with stakeholders and investors by displaying a transparent financial status.

What are the Different Methods to set up Deferred Revenue in QuickBooks Accounting Software?

The configuration of deferred revenue varies in QuickBooks Desktop and QuickBooks Online. Both accounts need a liability account and record the advance payment. In addition, both accounts acknowledge revenue when goods/services are offered.

QuickBooks Online: Here are the steps to set up deferred revenue in QuickBooks Online:

1. Prepare a Deferred Revenue Liability Account
   • Click the “+New” icon.
   • Now choose the “Chart of Accounts”.
   • Click the “New” button.
   • From the “Account Type” dropdown, choose the option “Other Current Liabilities”.
   • From the “Detail Type” dropdown, choose the “Trust Accounts-Liabilities” option.
   • Add a name to the Deferred Revenue account.
   • Click the “Save and Close” button.

2. Record the First Payment:

1. Head to the option “Accounting”. 
2. Now choose the option “Make General Journal Entries”.
3. Record the payment account to the debit side in the cash account.
4. In the deferred revenue account, record the same amount as credit.

3. Record Revenue at Delivery

1. Head to the “Accounting” option.
2. Now choose the option “Make QuickBooks General Journal Entries”.
3. Record a debit in the deferred revenue account.
4. For the same amount, record as credit in the income account.

4. Prepare a Product/Service for Invoicing (Optional)

1. Click the “+New” icon.
2. Now choose the option “Products and Services”.
3. Click the “New” button.
4. Select the product or service type.
5. Add a name to the item.
6. Connect it with the deferred revenue liability account.
7. Click the “Save and Close” button.

QuickBooks Desktop: Here are the steps to set up deferred revenue in QuickBooks Desktop:

1. Prepare the Deferred Revenue Account
   • Head to the option “Transactions”.
   • Now select the “QuickBooks Chart of Accounts” option.
   • In the “Account Type” dropdown, choose the option “Other Current Liabilities”.
   • In the “Detail Type” dropdown, choose the option “Trust Accounts-Liabilities”.
   • Add a name to the Deferred Revenue account.
   • Click the “Save and Close” button.

2. Register the Prepayment

1. Head to the option “Accounting”. 
2. Now choose the option “Make General Journal Entries”.
3. Record the payment account to the debit side in the cash account.
4. In the deferred revenue account, record the same amount as credit.
5. Set the payment status as paid and add remarks.
6. Save the transaction.

3. Acknowledge the Revenue

1. Head to the option “Accounting”. 
2. Now choose the option “Make General Journal Entries”.
3. Record the payment account to the debit side in the cash account.
4. In the deferred revenue account, record the same amount as credit.
5. Set the payment status as paid and add remarks

Manual Journal Entry Method

Both the cash inflow and obligation are registered in a manual journal entry.

• For the cash received or cash inflow, debit the accounts receivable account.
• Record the same amount to the credit side in the deferred revenue liability account.

Note: This displays additional resources and the obligation to supply goods/services in the future.

How to Calculate Deferred Revenue in QuickBooks?

To calculate deferred revenue in QuickBooks, follow these steps:

1. Acknowledge the Advance Payments: Locate all the payments acquired prior to delivering goods/services. For instance:
   • Prepayments for contracts or subscriptions.
   • Deposits from customers.
   • Advance client payments.

2. Register as Deferred Revenue: Prepare a liability account named Deferred Revenue in the Chart of Accounts. Rather than income, record every advance payment.

3. Identify Revenue gradually: Move earned amount from deferred revenue to the income account during goods/service delivery.

Conclusion

Precisely calculated deferred revenue is crucial for correct financial reporting. In this guide, complete information on deferred revenue in QuickBooks has been shared. This guide includes the steps to record deferred revenue in QuickBooks Desktop and QuickBooks Online.

Still, if there is any query or question, feel free to reach out to our team of QuickBooks experts. Our support staff have the expertise and knowledge to deal with such issues in QuickBooks. Feel free to reach out to us at +1-347-967-4079.

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