[header] How to account for customer deposits [title] Create an account called " customer deposits " or " prepaid sales " in your accounting journal. [step] While a customer deposit sounds like straight income to you, it is in fact a liability to the business because you " owe " the customer something. This is why you need to create a special account. 
[substeps] Think of an account as like a line item on your personal budget. Check to make sure that this " customer deposits " account has not already been created under another name.