How to handle customer deposit

I save payments that do not have invoices to be applied to all the time. I am using 2004 Contractor Edition, but I see no reason why newer versions won't allow it. It asks about it if there is nothing to apply the payment to, but I can enter it just fine.

The simplest way is to use Receive Payments to record the payment for that customer. This will leave a credit on the customer's account. Then when you create the invoice go back into Receive Payments and apply the credit to the invoice creating a $0 check. At the end of the year you need to reclassify any unearned income to the balance sheet.

An alternative method is to create an asset account Called Customer Deposits. Create an item pointing to this account. Create an invoice to represent the amount of the deposit. Then when you create the final invoice add this deposit Item on the invoice with a negative amount. (QB will allow negative amounts on transactions as long as it is not the first line on the transaction.)This will clear the amount of the deposit in the asset account while recording the income now earned.