mac 2020 desktop: Use an asset account to track VENDOR prepayment AND record actual bills in the vendor account.
I have tried the option 2 method by creating an OCA account. However step three does not work in this scenario....
"Option 2: Use an Asset account to track the prepayment
You can write a check to the vendor and record it to an Other Current Asset (OCA) account, increasing the balance until you are ready to pay the final bill.
Create an Other Current Asset (OCA) account to track prepayments.
Go to the Lists menu, then select Chart of Accounts.
In the Chart of Accounts, right-click anywhere, then select New.
From the Other Account Types drop-down, choose Other Current Asset. Select Continue.
Enter Prepaid Inventory as the Account Name.
Select Save & Close.
Write a check to your Vendor.
Go to the Banking menu, then select Write Checks.
Enter the vendor name, date, and payment amount.
Go to the Expenses tab. In the Account column, select the OCA account.
Select Save & Close.
Enter the bill when the items arrive.
Go to the Vendors menu, then select Enter Bills.
Go to the Expenses tab, then select the OCA account.
Enter the amount of the prepayment as a negative value.
On the Items tab, enter the items. The bill will equal the balance owed after deducting the prepayment. Note that recording the bill will reduce the asset account.
Select Save & Close.
Pay the bill balance.
Go to the Vendors menu, then select Pay Bills.
Select the bill you entered, then Pay Selected Bills. QuickBooks will then create a Bill Payment Check for the balance.
View existing prepayments
Go to the Reports menu, then select Vendors & Payables and then Vendor Balance Detail.
Select Customize Report, then go to the Display tab.
Select the desired date range for the report.
Go to the Filters tab, then select Account from the list.
From the Account drop-down, select the asset account created to track prepayment amounts."
Here are the facts. I pay a budgeted amount to the utility and they bill me for the actual amount; sometimes more than the budgeted amount. Due $80.00, actual amount...$60.00 or sometimes $90.00. I have an OCA set up for clearing account, and a utility expense account. When I try to enter bills using a negative number in expense and a positive number in item they conflict and are out of balance as directed in the article above entering bills.
Not to mention it seems like poor accounting practice to do it this way...how can it be properly handled?
Let me shed a light on that process, hardymac.
If you followed the steps in this article: Record vendor prepayments or deposits for prepaid parts or services. And entered the same amount negative on the expenses tab and positive on the item tab, you should have a balanced amount and it will mark the bill as paid automatically. It only goes out of balance if the amounts entered are different.
Can you share how much your budgeted amount is? I need to know the exact figure since I'm quite confused why your due date is $80 wherein the actual amount ranges from $60 to $90. Any details are highly appreciated.
Also, you can reach out to your accountant for other ways in handling this to ensure the accuracy of your books.
You're always welcome to post a reply below. I'll keep an eye on it and get back with more details.
I appreciate you for getting back, @hardymac. It's my priority to help you with getting the correct balance of your transactions.
As mentioned by Giovann_G above, this article should help you with handling vendor prepayments in QuickBooks Desktop. Since the system won't allow you to input different amounts when trying to get the balance, I would recommend seeking assistance from your accountant concerning this matter.
He or she can assist you further with checking your transactions and will guide you with picking the correct accounts to get an accurate result. If you don't have one, you can open this link and get a free consultation from any available experts: Find an accountant or bookkeeper who loves your business as much as you do.
For more tips about the vendor transaction workflows in QuickBooks, you may check out this article (for QBDT for windows, but the same scenario applies for Mac): Accounts Payable workflows in QuickBooks Desktop.
If you have any other follow-up questions about vendor prepayments, please let me know by adding a comment below. I'm more than happy to help. Wishing you a good one!