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Intuit
5 helpful votes

How to track your prepaid inventory

Learn how to track the items that you’ve paid but haven't received yet in QuickBooks Online.

You can record a payment to your supplier, without affecting the inventory quantity on hand until you've received the items.

The following steps work well if you don't want to see a credit in Accounts Payable or when you want to separate prepaid inventory from the inventory asset account.

Step 1: Create a Purchase Order (PO) when the order is placed.

  1. Select the + New button.
  2. Select Purchase Order.
  3. Fill in the appropriate fields.
  4. Go to the Item details section, then enter the details of the product/service you are purchasing.
  5. Select Save.

Step 2: Write a cheque to the supplier then categorize the payment under a prepaid inventory account.

  1. Select the + New button.
  2. Select Check.
  3. Select the supplier.
  4. In the Category details section, choose another current account such as Prepaid Inventory then enter the amount of your payment.
  5. Select Save.

Step 3: When the inventory is physically received, you can roll the PO to a bill for that supplier.

  1. Select the + New button.
  2. Select Bill.
  3. Select the name of the supplier.Note: When you select the supplier, any open purchase orders for that supplier will appear at the right side of your screen.
  4. Locate the purchase order you created then select Add Purchase Order.
  5. Select Save.

Step 4: On the previously written cheque, re-categorize the payment to Accounts Payable, which will create a credit for the Supplier.

  1. In the Cheque screen, change the Account to Accounts Payable (A/P) in the drop-down.
  2. Select Save.

Step 5: Finally, show the bill you created for your supplier as paid.

  1. Select the + New button.
  2. Select Check.
  3. Select the supplier from the drop-down list.
  4. Add the bill and the cheque you entered for the supplier.
  5. Select Save.Note: After adding, the bill appears under "Outstanding Transactions," and the cheque under "Credits."
Tip  Another way of tracking prepaid inventory is to create a PO when the order is placed, enter a bill payment cheque, then establish a credit for the supplier. When the items are received, convert the PO to a bill then apply the previous bill payment to the bill.

 

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