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Record supplier prepayments for products or services in QuickBooks

by Intuit•17• Updated 2 months ago

Learn how to record payments made to a supplier before receiving the final bill. These prepayments may be required when ordering parts or services. You can track them in QuickBooks so your accounts and VAT reporting remain accurate.

Please consult your accounting professional if you are unsure about this process or if they have a preferred method for recording these transactions.

Choose the right VAT method

Select the VAT method you use in your accounts to ensure supplier prepayments are recorded correctly and VAT is reported accurately.

Accrual / Standard basis: VAT reported on receipt of the bill

  1. Select + New or + Create.
  2. Choose Cheque and enter: Supplier/Payee name, Bank account, and Payment date.
  3. In the Category section, enter the relevant details. Enter the Amount paid.
  4. Do not select a VAT code.
  5. Select Save and close.
  6. Repeat for any additional prepayments.
  1. Select + New or + Create.
  2. Select Bill.
  3. Enter the necessary details including VAT.
  4. Select Save and close.
  1. Open the bill and select Make payment.
  2. In Outstanding Transactions, tick the bill you want to associate with the prepayment.
  3. In the Credit section, select the relevant prepayment(s).
  4. If a balance remains, QuickBooks will create a Bill Payment Check. You can adjust the amount if you don’t want to pay the remaining balance.
  5. Select Save and close.

Cash basis: VAT reported when payments are made

If you report VAT on a cash basis, prepayments should be tracked so VAT is reported when the payment is made.

  1. Go to All apps A bunch of numbers and letters on a tile wall., select Accounting, then select Chart of accounts (Take me there).
  2. Select New.
  3. From Account Type, choose Current assets.
  4. From Detail Type, choose Other current assets.
  5. Name the account, e.g., Supplier Prepayments, and select OK.

Tip: For a small number of suppliers, create sub-accounts for each to track payments more easily.

  1. Select + New or + Create.
  2. Select Cheque/Expense.
  3. Enter Supplier/Payee name, Bank account, and Payment date.
  4. In Category, select the prepayments account created earlier.
  5. Enter the Amount paid and select the relevant VAT code.
  6. Select Save and close.
  7. Repeat for all prepayments.
  1. Select + New or + Create.
  2. Select Bill.
  3. In Category, select the prepayments account.
  4. Enter the prepayment amount as a negative value. This prevents claiming VAT twice.
  5. In Item details, enter the items for the bill. The bill balance will reflect the amount owed after applying prepayments.
  6. Select Save.
  1. Open the bill and select Make payment.
  2. Enter the remaining Amount to pay.
  3. Select Save and close.

Run a report to track prepayments

  1. Go to All apps A bunch of numbers and letters on a tile wall., select Accounting, then select Chart of accounts (Take me there).
  2. Locate the prepayments account.
  3. In the Actions column, select the dropdown next to Account history and choose Run report.
  4. Adjust the Report period as needed.
  5. To group by supplier, select Group by > Name.
  6. Select Run report.
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