Why isn't a deposit income right away?
When a customer pays a deposit, you haven't done the work yet. If the event cancels, you might have to give it back. Until the event happens, that money belongs partly to the customer.
If you count deposits as income the day they come in, your books get ahead of reality. Spring looks amazing because next summer's deposits are piling up. Then summer looks weak because the money was already counted. Worse, you can end up paying tax on money you still owe.
So deposits go into an account that shows money you owe, often called Customer Deposits. They move to income on the event date.
How do you record a booking deposit?
Here's an example. A customer books a $400 party for six weeks out and pays a $100 deposit.
- Deposit day. $100 lands in the bank. It goes into Customer Deposits, as money you owe. Not income.
- Event day. You deliver. The customer pays the other $300.
- Same day. The $100 moves out of Customer Deposits and into rental income. Together with the $300, the event shows $400 of income on the date it happened.
Now your income lands in the month you earned it, and your Customer Deposits total tells you how much of next season's money is already in your bank.
What happens when a customer cancels?
It depends on what you actually do. The books should match it.
| What happens | Where it goes |
|---|---|
| You refund the deposit | Comes off Customer Deposits. It was never income. |
| You keep the deposit under your policy | Moves from Customer Deposits to cancellation income on the day you keep it. |
| You give a rain-check or credit | Stays in Customer Deposits until it's used or expires under your policy. |
| You keep part and refund part | Split it. The kept part is cancellation income. The refunded part comes off Customer Deposits. |
Keep cancellation income on its own line. It tells you how much your policy is protecting you, and how often cancellations happen.
How should weather cancellations be handled?
Wind, rain and heat cancel events in this business. Many owners refund or give a credit for weather, and keep the deposit for other cancellations. Whatever your policy is, record what you actually did.
If your crew already loaded or drove out before the call, that labor still happened. It's a real cost of the season, even with no income next to it. Tracking it shows you what weather really costs you each year. For the inflatable side of this, see bookkeeping for inflatable rental companies.
Are damage waivers income?
Yes. A damage waiver is a fee the customer pays so they aren't on the hook for normal accidents. You keep it whether or not anything breaks. That makes it income.
Keep it on its own line, separate from rental income, so you can see what it brings in each year next to what you spend on repairs. Some states charge sales tax on damage waivers and some don't. Check with your CPA or your state.
What about refundable security deposits?
A security deposit you plan to give back is never income. It's money you're holding for the customer.
- If you return it in full, it comes off what you owe.
- If you keep part of it for damage or extra cleaning, that part becomes damage income when you keep it.
What should you check every month?
One number tells you if your deposits are under control: the Customer Deposits balance in your books.
Pull a list from your rental software of every future event with a deposit paid. Add up those deposits. That total should match the Customer Deposits balance in QuickBooks.
If the books show more, a past event probably never got moved to income, or a refund never got recorded. If the books show less, a deposit probably got counted as income too early. Either way, you've found it now instead of at tax time.
This check takes a few minutes once your books are set up right. It's one of the first things we look at every month.
How does this work with Stripe and rental software?
Most rental software takes payments through a processor like Stripe or Square. When those tools connect to QuickBooks, they often create the invoice and the payment for you.
Here's the trap. The bank feed also shows that same money coming in. If someone adds it again from the bank feed as new income, you've counted it twice. We match every incoming payment to the deposit that's already there, never add it again, and record processor fees as an expense so your sales number stays real.
Want this done for you every month? See bookkeeping for party and event rental companies.
