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How to track your prepaid inventory

SOLVEDby QuickBooks106Updated 1 month ago

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 vendor, 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 + New.
  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 check to the vendor then categorize the payment under a prepaid inventory account.

  1. Select + New.
  2. Select Check.
  3. Select the vendor.
  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 vendor.

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

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

  1. In the Check screen, change the Account to Accounts Payable (A/P) in the dropdown.
  2. Select Save and close.

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

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


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