HOW TO CODING THE PREPAID TO THE 3RD PARTY ON BEHALF OF THE CUSTOMER

Recording the prepayment and coding the payment may be complex but I'm here to guide you how, PARKSG.

You can utilize our Projects feature so you can record and separate the transactions of a specific customer and supplier. Please know that this feature is only available in QuickBooks Online Plus. To turn on projects, follow the steps below:

1. Click the Gear ⚙ icon, then select Account and settings.
2. Go to the Advanced tab.
3. Find the Projects section and select Edit ✎ to expand it.
4. Turn on Organise all job-related activity in one place.
5. Click Save and close your settings.

Once done, enter Bank Deposits to show money received from the Customer, recording them to the Accounts Receivable (A/R) account increases the Customer balance until you enter the final Invoice.

1. Click + New.
2. Select Bank Deposit.
3. Select the Bank Account the money is received into and the Payment Date.
4. Scroll down to the Add funds to this deposit section, enter information as follows:
   • RECEIVED FROM:  Customer Name
   • ACCOUNT:  Debtors (or Accounts Receivable)
   • AMOUNT:  Enter amount paid by the Customer.
5. Click Save and close.
6. Repeat steps 1a-1d for each payment received from the Customer in advance of raising the Invoice.

Then, enter the invoice:

1. Click + New.
2. Select Invoice.
3. Fill out the necessary information, including the tax information.
4. Click Save and close.

Next, apply prepayments to the invoice: 

1. Locate and open the Invoice.
2. In the top right-hand corner, click Receive payment.
3. In Outstanding Transactions section, tick/select the Invoices you want to associate with the prepayments.
4. In the Credit section, tick/select the relevant Payments created in Step 1, above.
5. If there is a balance due on the Bill, you can pay the remainder by editing the Payment amount against the Invoice. If you don't want to pay the remaining amount, edit the Amount figure above the right-hand side of the Outstanding Transactions section.
6. Click Save and close.

You'll want to track payments against the Current Liability account. You can consult your Accounting professional to see if they have a preferred method of recording these transactions.

1. Create a Current Liability account to track prepayments.
   1. Click Accounting in the left-hand navigation bar, choose Chart of Accounts.
   2. In Chart of Accounts, click the New button.
   3. From the Account Type drop-down list, choose Current Liabilities.
   4. From the Detail Type drop-down list, choose Current Liabilities.
   5. Enter the Account Name, e.g. Customer Prepayments, click OK.
      • Tip:  If a small number of customers pay you in this way, you could create Sub-Accounts for each Customer, as this may make it easier to track amounts paid
2. Create a Service item, that posts to the above Account
   1. Go to the Gear ⚙ icon, then select Products and Services.
   2. Click the New button, select Service.
   3. Enter a Name, e.g. Customer Pre-Payments.
   4. Go to the 'Income Account' field, from the drop-down select the account created in Step 1, above.
   5. Click Save and Close.
3. Enter Sales Receipts for each payment received in advance of the Invoice, posting to the new Service item.
   1. Select + New.
   2. Select Sales Receipt.
   3. Select the Customer Name, Payment Date, and the Bank Account the money was received in to.
   4. In the PRODUCT/SERVICE field, select the Prepayments account created in Step 2, above.
   5. In the Amount column enter the Amount received.
   6. Click Save and close.
   7. Repeat steps 3 #1 - 3 #5.  for subsequent payments made in advance of the Invoice being raised.
4. Enter the Invoice, ensuring the prepayments are taken into account.  TIP - See the last section at the bottom of this article for a report that shows the amount of prepayments made.
   1. Select + New.
   2. Select Invoice.
   3. Enter Customer details as normal, with line items detailing the Services provided, select the relevant VAT code(s).
   4. On the last line item, select the Customer prepayments item created in Step 2, above.
   5. Enter the amount of prepayments as a Negative value..
      • IMPORTANT - The amount in Step 4 #4 needs to be entered as a negative with a tax code selected, as this ensures tax isn't counted twice.
5. Pay the Invoice balance - If there is a balance due after the prepayment is applied.
   1. Locate and open the Invoice.
   2. In the top right-hand corner, click Receive payment button.
   3. Enter the amount being paid in the Amount box.
   4. Click Save and close.

To help identify the amount of prepayments made to a Supplier, you can run the following report:

1. Click Accounting in the left-hand navigation bar, locate the Customer Prepayments account.
2. In the Actions column to the right-hand side, click the drop-down next to Account history, select Run Report.
3. Select the required date range by clicking the Report period drop-down
4. If you have all Customer prepayments going to the same account, click the Group by drop-down and select Name.
5. Click Run report.

For your reference, you can run reports to show the information you need. Read this article so you'll be guided: Run Reports in QuickBooks Online.

Let me know if you need anything else about prepayments. The Community is always right here for you to assist. 

@MariaSoledadG Wow, thanks for your support indeed, but unluckily we are using QBO Essential only...ㅜㅜ