Note: This is assuming the customer deposit was already booked BEFORE the payment was actually applied to the customer’s open invoice.

  1. Be sure that the pre-existing customer deposit is actually booked correctly for this to work.
    1. Go to the customer deposit entry in QuickBooks Online and ensure two things here:
      1. The “Received From” field is filled in with the customer’s name.
      2. The “Account” field (next to the customer name) states “Accounts Receivables” and not an income account.
    2. Now go to the customer’s profile and transaction history in QuickBooks online.
      1. You can do this by choosing Sales>Customers, then find your customer and click on their name to view the Transaction List.
    3. Find the invoice you want to apply this deposit to and click on “Receive Payment” on the right side of that invoice listing (Note: Some other versions of QuickBooks Online may instead state “Mark As Paid” instead of “Receive Payment”).
    4. The first thing to do on this “Receive Payment” screen is choose a payment date that is on the same date or after the deposit date.
      1. This is to ensure your financial reporting in QuickBooks Online will make sense.
    5. Under “Reference no.” I would suggest to type in “apply” or something similar.
      1. Since you are not actually receiving a payment here, it helps to identify what this entry is really for.
    6. QuickBooks automatically (per the company settings) tries to apply the outstanding deposit credit to the open invoice:
      1. You will notice both the credit and the outstanding invoice are check- marked. Be sure to keep it this way.
      2. However, you will still need to verify three things here before saving and closing:
        1. Be sure the payment field on the right side of the invoice item is the SAME AMOUNT as the credit you are applying. If not, then simply type in the exact credit amount into the payment field.
        2. The “Amount Received” at the top right needs to be zero. This is how you can tell if BOTH the credit and payment fields exactly match each other.
        3. Now scroll to the bottom and be sure “Amount to Apply” states the exact amount as the credit, and the “Amount to Credit” states zero.
  1. Click Save and Close.
  2. You will now see the new Payment item you created in the customer’s transaction list.
  3. You will also now notice the status of the Deposit item is in a “Paid” status.
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