Backstage Pass to the Advance Deposit

Around this time of year, we receive many questions about what an Advance Deposit is and how it works. The Advance Deposit is simple to understand if you know the working parts behind it.  Let’s go backstage and look behind the scenes of the Advance Deposit!

The Advance Deposit is a billing item that allows the school to receive money at one time but realized at a later date. For example, a student pays $500 to hold their place at the school next year. The school has to accept that money but isn’t quite ready for it to credit the Accounts Receivable account in the General Ledger. How does that school accept that money before putting it on the books for next year (usually after 7/1)? The Advance Deposit!

Let’s walk a little further backstage to get a closer look at the Advance Deposit:

If I send you a $500 check to hold my place for school next year, the payment will be added along with the Advance Deposit. At the bottom of the payment record, there is an option to create an Advance Deposit. Once the Advance Deposit is saved, there are two things created on the student’s Activity tab:

• One transaction for the payment.
• One transaction for the advance deposit.

The payment should be applied to the Advance Deposit, which results in a zero balance for the student.  That’s because the Advance Deposit acts like a charge; it keeps the money in the liability account until you generate the Advance Deposit. Placing the money in your liability account allows you to accept the money but not realize the money in your Accounts Receivable account.

When the Advance Deposit is generated (through Generate Transactions Automatically), a third line will appear on the activity tab: A credit of $500. This credit will be used to pay my billed charges. When the credit is generated, the money moves out of your liability account and into the Accounts Receivable account.

That ends our tour, folks! I hope that clears up how the Advance Deposit works. Please leave a comment if you have any questions.