Printing the Same Invoice Twice: Once as a Proforma Invoice and Once as a Tax Invoice
Construction companies often need to print the proforma invoice, which does not reflect revenue when first issued, with the title “Proforma Invoice” and then print it again upon project delivery with the title “Tax Invoice,” using the same data and details. How can you set this up to issue the same invoice twice while maintaining accurate accounting and setting up the correct journal entries?
We will outline the details in this guide.
Setting Up the Template Title
To print the same invoice but with a different title each time, you need to create two versions of the same invoice with a different template name for each.
Template with the Title "Proforma" Invoice
Click on “Printable Templates” from the “Templates” dropdown menu in the main menu, then click on “Invoice/Estimates Layout.”
Select the template you want to print the invoice with the same design and data, then click on the three dots next to it and select “Clone” from the dropdown menu to create a duplicate of this template.
Click on “Title” from the main menu and enter “Proforma Invoice” in the “Invoice Title” field so that the title of this version of the invoice template will appear as Proforma Invoice.
Then click on “Template Details” from the sidebar and enter in the “Template” field the external template title by which this template will be called for printing. We can name it “Proforma Invoice Template,” for example, and then click the “Save” button.
Template with the Title Tax Invoice
Now, repeat the same steps but set the title of the next version to “Tax Invoice.”
Click on “Printable Templates” from the “Templates” dropdown menu in the main menu, then click on “Invoice/Estimates Layout”.
Select the same template you want to print the invoice with the same design and data, then click on the three dots next to it and select “Clone” from the dropdown menu to create a new copy of this template.
Click on “Title” from the main menu and enter “Tax Invoice” in the “Invoice Title” field, so that the title of this version of the invoice template will appear as Tax Invoice.
Then click on “Template Details” from the sidebar and enter in the “Template” field the external template title by which this template will be called for printing. We can name it “Tax Invoice Template,” for example, and then click on “Save“.
After saving, click on the three dots next to the template and select “Mark as Voucher” from the dropdown menu so that you can print the same proforma invoice titled “Tax Invoice” when needed.
Creating Unearned Revenue Account
Prepaid invoices represent revenue for which the service has not yet been provided. Therefore, it is temporarily recorded in unearned revenue until the service is completed, at which point it is transferred to earned revenue, i.e., the sales account.
To direct proforma invoices to the unearned revenue account, we must first create the unearned revenue account in the chart of accounts.
Click on “Chart of Accounts” from the dropdown of “Accounting” in the main menu, then click on “Current Liabilities“.
Select the account type as “Sub-account” and enter the account name “Unearned Revenue”.
Setting Up Sales Account Routing
Proforma invoices (unearned) should be routed to the “Unearned Revenue” account that we added to the chart of accounts. Once the project is delivered and the proforma invoice is converted to a regular tax invoice, it will be rerouted to the “Sales” account.
Click on “Accounting Settings” from the dropdown of “Accounting” in the main menu, then choose “Accounts Routing“.
Then click on “Sales” from the sidebar and select the type of direction for the “Sales” field as “Specify per each“.
Creating and Printing Proforma Invoice
To add a proforma invoice to the account, go to “Create Invoice” from the “Sales” dropdown menu in the main menu, then select the “Proforma Invoice Template” we created from the invoice template field. Choose the “Unearned Revenue” account from the ledger account field, complete the invoice details, and click the “Save” button.
After saving, you will find the unearned invoice titled “Proforma Invoice,” and you can print it or save it as a PDF file.
You will also see the journal entries for the invoice, which have been created automatically. You can access them by clicking on the entry number at the top of the invoice or from the “Journal Entries” dropdown under “Accounting” in the main menu.
The journal entry for the unearned proforma invoice is recorded as follows:
Debit:
From Client Account
10,000
Credit:
To Account Unearned Revenue
10,000
When you click on “Chart of Accounts” under “Accounting” in the main menu, you will find that the journal entry for the proforma invoice has been recorded in both the Unearned Revenue account and the Client account.
Printing the Proforma Invoice Again as a Tax Invoice
When delivering the project, you need to print the proforma invoice again under the title of a tax invoice. It is not advisable to recreate the same invoice again; therefore, we follow the steps below:
Click on “Manage Invoices” under “Sales” in the main menu, then select the proforma invoice you want to reprint. Click on “Receipts” and choose from the dropdown menu “Tax Invoice Template.
The proforma invoice will appear but titled as a Tax Invoice instead of a Proforma Invoice. You can print it or download it as a PDF.
Converting Unearned Revenue Entry to Sales
After printing the tax invoice, the accounting treatment remains, as it is necessary to record the conversion of unearned revenue to earned revenue. This is done by adding a journal entry that transfers the unearned revenue entry to sales (earned revenue).
Press “Add Entry” from the “Accounting” dropdown in the main menu to create a manual entry.
We record the entry as follows:
From the Account Unearned Revenue
10,000 Debit
To Sales
10,000 Credit
Then press the “Save” button.
And you will find the entry saved in the chart of accounts under the Sales account and the Unearned Revenue account.
Unearned revenues appear on the balance sheet (statement of financial position) but do not show up in the income statement. However, when these revenues are converted into sales as earned revenues, they will appear in the income statement and will no longer be reflected on the balance sheet.