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How to Account for Customer Deposits


Sometimes a business needs to make a deposit of cash up front when placing a business-to-business order. This may be for an unusual one-time purchase such as for a large piece of machinery, or the business may not have the credit required with its supplier in order to be allowed to pay for the goods after delivery. There may also be times when you are the seller and have agreed to let your customer make a deposit on an order and to pay the balance after you deliver the goods or services. For example, this down payment might cover the cost of your raw materials. Regardless of the reasons behind down payments, accounting for them correctly is important. Below you will learn how to account for customer deposits, whether you are making or receiving a deposit for an order.

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