Record vendor prepayments or deposits in QuickBooks Desktop

Find out how to record vendor prepayments or deposits in QuickBooks Desktop.

Track your prepayments accurately to maintain smooth transactions and timely payments. You can record them in two ways: through Accounts Payable or an Asset account. Here’s how.

Tip: Check with your accountant to find the best option for your business.

Record prepayment using Accounts Payable

Write checks to your vendors and track them in Accounts Payable as money owed. This lowers your balance until you're ready to enter the final bill and process the invoice.

1. Create a check for the vendor.
   1. Go to the Banking menu, then select Write Checks, or press Ctrl + W.
   2. Enter the vendor name, date, and payment amount.
   3. Go to the Expenses tab. Select the Account column dropdown ▼, then enter Accounts Payable.
   4. In the Customer: Job column, select the dropdown ▼, then choose the vendor name.
   5. Select Save & Close.
2. Enter the bill.
   1. Go to the Vendors menu, then select Enter Bills or Receive Items if you need to record the bill later.
   2. Enter the necessary information.
   3. Select Save & Close.
3. Apply the prepayment to a bill.
   1. Go to the Vendors menu, then select Pay Bills.
   2. Select the bill you want to associate with the prepayment.
   3. Select Set Credits.
   4. Select the prepayment on the Set Credits screen. Check it, then select Done.
      Note: If there’s a balance due on the bill, QuickBooks will create a Bill Payment Check.

Record prepayment using an Asset account

Write checks to your vendors and track them in an Other Current Asset (OCA) account. This records prepayments for future goods or services. It also increases your balance until you're ready to pay the final bill and process the invoice.

1. Create an Other Current Asset (OCA) account to track prepayments.
   1. Go to the Lists menu, then select Chart of Accounts, or press Ctrl + A.
   2. Select the Account dropdown ▼, then select New, or press Ctrl + N.
   3. From the Other Account Types dropdown▼, choose Other Current Asset. Select Continue.
   4. Enter Prepaid Inventory as the Account Name.
   5. Select Save & Close.
2. Write a check to your Vendor.
   1. Go to the Banking menu, then select Write Checks, or press Ctrl + W.
   2. Enter the vendor name, date, and payment amount.
   3. Go to the Expenses tab. In the Account column, select the OCA account.
   4. Select Save & Close.
3. Enter the bill when the items arrive.
   1. Go to the Vendors menu, then select Enter Bills.
   2. Go to the Expenses tab, then select the OCA account.
   3. Enter the amount of the prepayment as a negative value.
   4. On the Items tab, enter the items. 
      Note: When you record the bill, it reduces the asset account to match the amount you owe after the prepayment.
   5. Select Save & Close.
4. Pay the bill balance.
   1. Go to the Vendors menu, then select Pay Bills.
   2. Select the bill you entered, then select Pay Selected Bills. This creates a Bill Payment Check for the balance.

View existing prepayments

1. Go to the Reports menu, then select Vendors & Payables and then Vendor Balance Detail.
2. Select Customize Report, then go to the Display tab.
3. Select the date range for the report.
4. Go to the Filters tab, then select Account from the list.
5. From the Account dropdown ▼, select the asset account created to track prepayment amounts.
6. Select OK.