I get asked this everyday.
"Why can't I just book my deposits as revenue?"
Watch this 3 min video where I explain why:
A deposit is NOT revenue.
the formula for a deposit is:
sales revenue + sales tax + shipping income + gift card liability - processing fees - loan withholdings = deposit to your bank
If you want to do proper accounting, you need to book each of these separately and then MATCH the total against the deposit.
ALSO, Deposits happen 1-7 days AFTER your sales took place.
If you get a deposit from Shopify on Monday for sales that happened Friday to Sunday, are you going to book those sales on the Monday date when the deposit hits? What if Monday was a new month? Now your month-to-month books are wrong and your sales tax payable is not going to be correct.
Proper accrual accounting for retail requires that sales and liabilities are booked on the day that they occur.
The deposits reconcile to those sales + liabilities when they hit the bank feed.
When you use bookkeep.com for Square, Shopify, and others, we do this for you automatically with simple journal entries.
One journal entry each day for the sales & liabilities and one journal entry for each deposit made to your bank account.
And it all reconciles PERFECTLY.