Unapplied Cash Payment Income and QuickBooks Online

unapplied cash payment income

Unapplied Cash Payment Income account may be something new to you, if you just switched over to QuickBooks Online (QBO).  When you try to fix it or get rid of it, it can be a hassle.  

I feel like the kitty picture to the right when I cannot grasp what some of the warning messages mean in QBO. Deleted elements?  Why did the customer name say it was active but the customer name still deleted?   Frustrated is how many users feel when they end up contacting support for help.  In the video below, you will see the vicious circle of trying to reactivate a customer, the system says the customer is active, but it really is not.  All I wanted to do was clear this unapplied cash payment income account.  There were many barriers to this process a very unclear warning box.

Unapplied cash payment income:  What the heck does that mean?

It has to do with reporting your records on a cash basis.  It is not an account you post to, but rather a QuickBooks account to switch the reporting system from accrual basis to cash basis.  I touched upon this account briefly in an earlier post.  See this post on cleaning up the Chart of Accounts.

From Intuit's official help article:  "This account is used to report cash basis income from customer payments that are received but not applied to any sales form. Simply put - you took the money in, but never declared the income on a sales form.

Usually, the date of the payment is before the invoice date it's applied to. Example: Receive payment today, invoice next week. It's "unapplied" until next week when the invoice hits the books.   Note:  This is what I see most often.

If an incorrect amount is showing in this account, you'll need to apply the payment to an invoice dated prior to the date of the payment. Otherwise, Unapplied Cash Payment Income is correct.

Another possible cause is that the product or service item on the invoice is mapped to a bank account type, which will cause the amount to go into Unapplied Cash Payment Income, without actual payment being received. Make sure the product or service is mapped to an income account type to prevent this from happening."

What if it is a customer deposit?

Put this customer deposit in the proper category.  The steps below outline how to create a customer deposit account on your chart of accounts:

  1. Choose the Gear Icon > Chart of Accounts.
  2. At the top of the screen, click New.
  3. Select Other Current Liabilities under Category Type.
  4. Select Other Current Liabilities  under Detail Type.
  5. Type in the name you want; for example, Customer deposits held
  6. Click Save.
  7. Create an item for the funds received.  Gear>products & Services>New
  8. Use the new customer deposit account in the item.
  9. Use the item in the invoice or sales receipt.

One more step for the customer deposit...

Normally, I enter my customer deposit on a sales receipt since that is how it is usually received, on the spot.  

When it comes time to charge the customer for services you perform for them, you'll turn the retainer or deposit you received into credit on an invoice and receive it like a payment: 

  • Create an invoice for your customer that lists the services or goods provided. 
  • On the last line, enter the Customer Deposit or Retainer Item in the Product/Service field.
  • Enter the customer deposit or retainer amount as a negative, which subtracts it from the invoice.  
  • You cannot enter a retainer or deposit amount greater than the invoice total as an invoice can have a zero total, but not a negative one.
  • Click Save and Close.
  • This decreases the amount in your liability account and applies the credit to your customer's invoice, which turns it into income. The money is now yours. 

    QBO warnings?  What do they mean?

    The warnings in QBO are either super clear or very unclear.  In this case, it appeared I was able to make my sub customer active, when in reality, it was not.  The warning that the list elements need to be reinstated was a bit unclear because my product and my sub customer and customer were all deleted elements.

    Last piece of advice: Take a deep breath...

    and slow down (some advice I should take myself sometimes).  Really read your warning.  Think it through.  If you get really stuck, you can always contact me!  I love a good puzzle!  And I am here to help you.

    If you have any questions or would like to see a future video on another topic, please reach out to me on Facebook.

    Lynda Artesani

    Lynda Artesani is the president of Artesani Bookkeeping where she uses her expertise and organizational skills to help her clients thrive and become profitable. Lynda is a member of the Intuit Trainer Writer Network. She is an alumni member of the Intuit Advisory Board. Additionally, she is the first Expert Columnist for the QB Community forum. She is also a co-founder in a Facebook group called QB Community Live!