Welcome to the Community, Tim.
Let me share information on applying for deposit payments and applying for the credit from the prepaid Contract purchases to this invoice prior to paying it in QuickBooks Online (QBO).
If you're ordering a part or service from a vendor, they might require you to make a prepayment or deposit before delivery. You have two options for recording these payments, you can either use Accounts Payable or an Asset account.
In using Accounts Payable in recording prepayment, you create a check to the vendor and record it to your Accounts Payable (A/P) account, decreasing the balance until you are ready to enter the final bill. After that, you have to apply the prepayment to a bill. You can follow the steps below.
- Go to the Expenses, then Bills.
- Click on Pay Bills, and choose the bill you want to associate with the prepayment.
- Select the Credits.
- Go to the Credits section and mark the vendor credit, then select Done.
Know that, If there is a balance due on the bill, QuickBooks will create a Bill Payment Check. To determine which option is best for your business, it is advisable to consult with an accounting professional.
Furthermore, you can use an Asset account to track prepayment. In setting the account, you can refer to this article as your guidance: Set up an asset account in QuickBooks Online.
Additionally, find out how and when to give a credit memo or delayed loan to your customers in QBO: Create and apply credit memos or delayed credits in QuickBooks Online.
Let us know if you need anything else or have any inquiries about applying the credit in your QBO. The Community will always be here to assist you.
