Instructions for Handling Layaways in QuickBooks Financial, per help menu are below.  However, I prefer our method of using a “Layaway Deposit” item to record as a liability on a Sales Receipt rather than recording a negative receivable.  This saves the need for a journal entry to close the books.

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Recording layaways using sales orders

Here's one method you can use to record layaways using QuickBooks.

1. Go to the Customers menu and click Create Sales Order.
2. Enter the order, but do not save it yet.
3. In the Memo field, enter Lay (or any other word you choose to represent layaway).

Note: Since a sales order is not an actual sale, this does not update quantities on-hand for inventory parts. When you create an invoice from this sales order, inventory will be updated.

1. Save the sales order.

*To accept prepayments for layaways

If you collect money from customers when they place a layaway order, here is a method you can use to record the prepayment:

1. Go to the Customers menu and click Receive Payments.
2. Enter the amount of the payment.
3. Click Print Credit Memo on the toolbar and give the customer a receipt for the prepayment.

This leaves a credit for this customer that you'll use later when you create the invoice for the layaway items.

 To record a customer's payment for layaway invoices

If you created a partial or full invoice for the layaway, you can use this method to receive payment:

1. Go to the Customers menu and click Receive Payments.
2. Click the Received From drop-down list arrow and choose the customer whose payment you want to record.
3. Enter the customer's payment in the amount field. *If you received prepayment and entered it as a credit memo earlier, DO NOT enter anything in the amount field. Instead, select the open invoice, and click Discount & Credits to apply the prepayment (credit) to the invoice.

1. Save the payment.

Below are some statements concerning the accounting for layaways, per U.S. SEC

Question 4

Facts:   Company R is a retailer that offers "layaway" sales to its customers. Company R retains the merchandise, sets it aside in its inventory, and collects a cash deposit from the customer. Although Company R may set a time period within which the customer must finalize the purchase, Company R does not require the customer to enter into an installment note or other fixed payment commitment or agreement when the initial deposit is received. The merchandise generally is not released to the customer until the customer pays the full purchase price. In the event that the customer fails to pay the remaining purchase price, the customer forfeits its cash deposit. In the event the merchandise is lost, damaged, or destroyed, Company R either must refund the cash deposit to the customer or provide replacement merchandise.

Question:   In the staff's view, when may Company R recognize revenue for merchandise sold under its layaway program?

Interpretive Response:   Provided that the other criteria for revenue recognition are met, the staff believes that Company R should recognize revenue from sales made under its layaway program upon delivery of the merchandise to the customer. Until then, the amount of cash received should be recognized as a liability entitled such as "deposits received from customers for layaway sales" or a similarly descriptive caption. Because Company R retains the risks of ownership of the merchandise, receives only a deposit from the customer, and does not have an enforceable right to the remainder of the purchase price, the staff would object to Company R recognizing any revenue upon receipt of the cash deposit. This is consistent with item two (2) in the Commission's criteria for bill-and-hold transactions which states that "the customer must have made a fixed commitment to purchase the goods."

Above is Excerpt from http://www.sec.gov/interps/account/sab101.htm

SEC Staff Accounting Bulletin:
No. 101 – Revenue Recognition
in Financial Statements

Securities and Exchange Commission

17 CFR Part 211

[Release No. SAB 101]

Staff Accounting Bulletin No. 101

Agency:   Securities and Exchange Commission

Action:   Publication of Staff Accounting Bulletin

Summary:   This staff accounting bulletin summarizes certain of the staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. The staff is providing this guidance due, in part, to the large number of revenue recognition issues that registrants encounter. For example, a March 1999 report entitledFraudulent Financial Reporting: 1987-1997 An Analysis of U. S. Public Companies, sponsored by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission, indicated that over half of financial reporting frauds in the study involved overstating revenue.

Date:   December 3, 1999

For Further Information Contact:   Richard Rodgers, Scott Taub, or Eric Jacobsen, Professional Accounting Fellows (202/942-4400) or Robert Bayless, Division of Corporation Finance (202/942-2960), Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549; electronic addresses: [email protected]; [email protected]; [email protected]; [email protected].

Supplementary Information:   The statements in the staff accounting bulletins are not rules or interpretations of the Commission, nor are they published as bearing the Commission's official approval. They represent interpretations and practices followed by the Division of Corporation Finance and the Office of the Chief Accountant in administering the disclosure requirements of the Federal securities laws.

Jonathan G. Katz

Secretary

Date: December 3, 1999

 
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