How do I record a customer prepayment/deposit?

To record a deposit/prepayment for a sale you plan on invoicing later, you can do the following:
 

  1. Set up an liability account to track the downpayment in your Accounts List
  2. Create an Item that links back to the liability account to record the sale of the deposit, maybe call it Prepayment or Deposit
  3. Create an invoice using the new Item to increase your liability and add the money to your bank account when you receive the payment on it. When you create an invoice, you can keep track of it at the customer level.
  4. When you are ready to invoice your customer for the final sale, create an invoice per usual with the items you are selling, then add the Prepayment or Deposit item to the invoice and enter in the amount prepaid as a negative in the Price field. This reverses out the liability and reduces the total balance due on the invoice.