Ways to Record Income (and How to Choose the Best Method)

Locked lesson.

Upgrade

About this lesson

Income can be recorded into QuickBooks using three methods: directly to the income account, using a sales receipt, and invoices. This lesson will focus on the differences between each allowing the user to determine which method is appropriate for them.

Quick reference

Determining which method to use when recording income

Within QuickBooks you can use 3 methods to record income, it's important to understand how these differ so you can identify which method is most appropriate for your business.

When to use

You'll record business income when your business has income.

Instructions

  • Invoices are used when you want to track sales to a specific customer who is going to pay later.
  • Sales receipts are used when you want to track sales to a specific customer who pays you immediately or when you want to track what was sold even if you don't care who you sold to. 
  • Deposits directly to income are used when you don't need to track who you sold to or what you've sold.

Hints & tips

  • Be mindful to pick a method for tracking your income and stick with it. If you mix and match, you're more likely to accidentally miss recording income or record the income more than once. These can be corrected but it's often frustrating to identify what to fix when there is no consistency.
Login to download
  • 00:05 In this video, I want to talk to you about recording your income and
  • 00:08 the various ways that you can record your income.
  • 00:11 The purpose behind this is to help you determine which method is most appropriate
  • 00:15 for your business.
  • 00:17 Let's first take a look at the profit and loss statement for our sample company.
  • 00:22 On the left hand side of the screen we're going to click on Reports.
  • 00:27 We're then going to select Profit and Loss.
  • 00:31 Let's talk about the things that we're selling.
  • 00:34 We're selling candy and soda.
  • 00:36 We're selling team building, track rental, and racecar training.
  • 00:43 When we think about these different things,
  • 00:46 we need to think about how much detail do we want in our QuickBooks for the sale.
  • 00:51 So candy and soda, we probably don't need to associate it to a client.
  • 00:56 Candy and soda is paid for on the spot, so
  • 00:58 we're definitely not going to to invoice it.
  • 01:01 The three ways that we can record the income within our QuickBooks is either to
  • 01:05 deposit the money directly into the income account to log a sales receipt,
  • 01:10 which is a sales document the link sold to the customer and is paid immediately.
  • 01:16 Or to create an invoice which is a sales document linked to the customer,
  • 01:21 but not paid immediately.
  • 01:23 In this example, candy and soda, you're likely just to lock the deposit as income.
  • 01:29 So what I mean by that is you're likely to click on the plus sign in the upper
  • 01:34 left hand corner, come over to Bank deposit,
  • 01:37 say I'm going to deposit money in a checking123.
  • 01:40 The reason I'm depositing the money is for candy and soda income.
  • 01:45 And I might say 7/27 sales and
  • 01:50 $501, Save and close.
  • 01:56 In other situations, maybe I want more detail.
  • 01:59 Maybe I want to track what specifically I sold or who I sold it to.
  • 02:04 I then have to decide, am I asking this person to pay money immediately or
  • 02:09 am I going to send them an invoice so they can pay me later?
  • 02:13 If I'm asking them to pay immediately, I'm going to make a sales receipt.
  • 02:17 So I'm going to go to the plus sign, come down to sales receipt.
  • 02:22 I'm going to say okay, Cheesy Chester, they bought from me today, and
  • 02:27 we'll say they bought eight hours of training.
  • 02:30 We're going to go ahead and click Save.
  • 02:33 And now that we're done working on this, I'm just going to go ahead and
  • 02:35 click the X in the upper right hand corner.
  • 02:39 Let's pretend that same example, Cheesy Chester called us and
  • 02:42 they said I would like to purchase eight hours of training.
  • 02:46 Let's get it scheduled, send me an invoice.
  • 02:49 And so you say fantastic I'd love to do that.
  • 02:51 You would come up to the plus sign in the upper left hand corner,
  • 02:56 click on New, come down to Invoice and just the same as before,
  • 03:01 you'll say Cheesy Chester, and then eight hours of training,
  • 03:06 and then you would send them an invoice.
  • 03:09 I'm going to ahead and click Save, and then the X in the upper right hand corner.
  • 03:15 The difference between the invoice and
  • 03:18 the sales receipt is whether it's paid now or paid later.
  • 03:21 The difference between both of those and depositing money directly into the income
  • 03:26 account is your ability to generate a report based on what you've sold.
  • 03:31 No matter what, you're going to see the income here.
  • 03:34 But let's take training income for example.
  • 03:37 In our business, we can sell two hours, four hours, and
  • 03:40 eight hours of track training.
  • 03:43 Maybe we want to identify what our good sellers are.
  • 03:46 On the left hand side of our screen, we can click on Reports.
  • 03:50 And we can say product, sales by product service summary,
  • 03:56 and now we can see, let me change the dates, all dates.
  • 04:02 Now we can see how many units we're selling of four hour training and
  • 04:05 eight hour training and two hour training.
  • 04:08 If we had just taken that training income,
  • 04:12 got up to the plus sign said new other bank deposit, and said,
  • 04:17 okay, I'm just going to log some training income over here and
  • 04:22 we'll make up a number that's real easy to spot in that other report, save and Close.
  • 04:29 Now when I refresh this, I don't see it.
  • 04:36 We just made a giant deposit for training income and it's not here.
  • 04:40 The reason it's not here is because we didn't pick one of these types of
  • 04:44 training income.
  • 04:45 So when you're thinking about what makes the most sense for your business,
  • 04:49 don't just think about the profit and loss report,
  • 04:51 think about what other detail might you want, right?
  • 04:54 I've got a million dollars for the trainee income.
  • 04:56 I have no idea if that was one sale or many sales.
  • 05:00 I don't know if somebody bought two hours every day for a year or
  • 05:04 if they bought some sort of super package that I created just for them.
  • 05:09 I also don't know who bought it.
  • 05:11 It says right here at the deposit, I can't go to the sales and then to
  • 05:15 the customer profile and look at the customer profile and see who bought that.
  • 05:19 One more thing, if you go to Reports and we say sales by customer summary,
  • 05:26 and then change the date range to all dates and run report.
  • 05:30 I still don't see that almost million dollar sale.
  • 05:34 So I strongly encourage you to think about it.
  • 05:36 If you want to keep track of the detail of what you've sold, or
  • 05:39 the detail of who you've sold it to.
  • 05:42 Then you need to come over here and make an invoice or make a sales receipt.
  • 05:46 But if you don't need that in your QuickBooks, either it just doesn't matter
  • 05:50 because the concession stand or it doesn't matter because it's elsewhere,
  • 05:54 feel free to come over here to New and then go to Other and then Bank deposit.
  • 05:58 Hopefully this helps you identify which way you want to track your income, because
  • 06:03 it definitely and I want you to track it all three ways, I want you to pick a way

Lesson notes are only available for subscribers.

Gift this course