How do I apply a cash prepayment to invoices if the invoice amount in less that the cash payment. I'll have a prepaid asset but QBO wont let me in the vendor page.

Hello there, jsullivan1.

Just to make sure we are on the same page, Are you attempting to apply a prepayment on a customer invoice or a vendor bill? I'd also appreciate it if you could provide a screenshot of the invoice you entered and the actual invoice that came in. This way, I can give you accurate steps and relevant information regarding your concern.

Please leave a comment below if you have any additional information to add to this thread. I'll wait for your response. Take care!

@jsullivan1 

What do you mean QB won't let you save?  When you delete the bill (QB uses the term bill to refer to vendor invoices), QBO will warn you that the bill is linked to other transactions (the bill payment) and ask "Are you sure you want to delete it?".  Click yes and now you have a credit with that vendor for the amount of the prepayment.  Enter the new bills, go to New > Pay bills and you can apply the prepayment credit to the bills as needed.  

1) I had to prepay cash to vendor - they sent invoice for 100K.  I entered invoice and paid cash.

2) They then sent invoices for 80K against that prepayment.

3) I deleted the 100K prepayment invoice and tried to apply the 100K payment to the 80K in invoices, but it won't match.  I cannot unmatch the payment (data came electronically from bank).

4) I want to match the invoices, then show the extra 20K as a prepaid asset.

Advice?  Thanks

Hi there, @jsullivan1.

I'm here to help you record your prepayment transaction and ensure that the amount of 20,000 is correctly reflected as a prepaid asset.

Here's how to record an Asset account to track prepayment:

1. Create an Other Current Asset to track prepayments.

1. Go to your Chart of Accounts.
2. Then, Click the New button on the right side.
3. From the Other Account Types drop-down, 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. Click the + icon, then click the Check.
2. Enter the vendor name, date, and payment amount.
3. Then, under the category, it should be Prepaid Inventory for the 100,000.
4. Select Save & Close.

3. Enter the bill for Vendor.

1. Click the + icon, then click bill.
2. Under the Category tab, the category details must be Prepaid Inventory.
3. Enter the amount of the prepayment as a negative value.
4. On the Item 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.
5. Select Save & Close.

To view the 20k as a prepaid asset:

1. Hover your cursor to the Accounting, then click Chart of Accounts.
2. Then, Find the Other Current Asset to view 20,000 as an Other Current Asset.

If you would like to view the complete help guide, you may refer to this:

• Record vendor prepayments or deposits for prepaid parts or services.

When it comes to the accounts that you need to use with the steps provided, I suggest consulting your accountant to properly guide you with this.

If you have plans on creating a vendor credit, here's the topic you can utilize for reference: Enter vendor credits and refunds in QuickBooks Online.

Please feel free to reach out if you've got more queries or need clarification. I'm just one post away.

@jsullivan1 

To confirm, you entered a bill for $100K, then issued a Bill Payment for $100K, correct?  If so, and then you deleted the bill, you should have a $100K credit with that vendor.  If you're not showing a $100K credit then you must have entered it differently.  You can then enter the bill for $80K and use $80K of the credit, leaving a $20K credit (A/P debit balance).  

Did you record the $100k bill/payment as a prepaid asset?  Technically, from an accounting standpoint, the prepayment is an asset.  However, QB is built to use a debit entry to A/P (as opposed to a debit entry to an asset) in order for credits to be automatically applied.  If you posted the prepayment to a prepaid asset account, you can enter the bill for $80K and then enter the prepaid asset account for negative $80K and that will reduce the prepaid asset and the bill will show paid, leaving $20K in your prepaid asset account.  None of this should have any impact on your $100K prepayment downloaded from your bank feed.   

Got it.  Many thanks.