Hi there,
When you order a part or a service from a supplier, the supplier might need you to pay a portion of the price before delivery. You have two options for entering the prepayments or deposits, either by using Accounts Payable or an Asset account. I recommend contacting your accounting professional to find out which option is best for you.
Option 1: Use Accounts Payable to record prepayment
You can write a cheque to the supplier and record it to your Accounts Payable (A/P) account, decreasing the balance until you are ready to enter the final bill.
- Create a cheque for the supplier.
- Go to the Banking menu, then select Write Cheques.
- Enter the supplier name, date, and the payment amount.
- Go to the Expenses tab. In the Account column, enter Accounts Payable.
- In the Customer:Job column, select the drop-down, then choose the supplier name.
- Select Save & Close.
- Enter the bill.
- Go to the Suppliers menu, then select Enter Bills or Receive Items (if you like to record the bill later).
- Fill in the necessary information.
- Select Save & Close.
- Apply the prepayment to a bill.
- Go to the Suppliers menu, then select Pay Bills.
- Highlight the bill you want to associate with the prepayment.
- Select Set Credits.
- The prepayment will display in the Set Credits screen. Make sure it is checked, then select Done.Note: If there is a balance due on the bill, QuickBooks will create a Bill Payment Cheque.
Option 2: Use an Asset account to track the prepayment
You can write a cheque to the supplier and record it to an Other Current Asset (OCA) account, increasing the balance until you are ready to pay the final bill.
- Create an Other Current Asset (OCA) account to track prepayments.
- Go to the Lists menu, then select Chart of Accounts.
- In the Chart of Accounts, right-click anywhere, then select New.
- From the Other Account Types drop-down, choose Other Current Asset. Select Continue.
- Enter Prepaid Inventory as the Account Name.
- Select Save & Close.
- Write a cheque to your Supplier.
- Go to the Banking menu, then select Write Cheques
- Enter the supplier name, date, and the payment amount.
- Go to the Expenses tab. In the Account column, select the OCA account.
- Select Save & Close.
- Enter the bill when the items arrive.
- Go to the Suppliers menu, then select Enter Bills.
- Go to the Expenses tab, then select the OCA account.
- Enter the amount of the prepayment as a negative value.
- On the Items tab, enter the items. The bill will equal the balance owed after deducting the prepayment. Note that recording the bill will reduce the asset account.
- Select Save & Close.
- Pay the bill balance.
- Go to the Suppliers menu, then select Pay Bills.
- Select the bill you entered, then Pay Selected Bills. QuickBooks will then create a Bill Payment Cheque for the balance.
View existing prepayments
- Go to the Reports menu, then select Suppliers & Payables > Supplier Balance Detail.
- Select Customize Report, then go to the Display tab.
- Select the desired date range for the report.
- Go to the Filters tab, then select Account from the list.
- From the Account drop-down, select the asset account created to track prepayment amounts.
- Select OK.
Let me know if this info helps. In case you have other questions, feel free to contact our support team using this link here.