Pre-Payment/Deposit to Vendor

This article describes two ways to record a pre-payment to a Vendor as well as applying that pre-payment to a future invoice.

Option 1: Create a Voucher for the Pre-Payment

This option is preferred if you wish to have a very clear audit trail concerning the pre-payment and Vendor history.  All activity for the transaction from deposit through the final payment is recorded in the AP Voucher process.

  1. Create a new Voucher
  2. Voucher Amount = Deposit Amount
  3. On the GL tab of the Voucher, enter your Pre-Paid Expense Asset account (or other GL account as applicable).
  4. Voucher Payment Type - use whatever mechanism is appropriate.  You can post the Voucher to AP, Open or AP, Marked to Pay to process the payment in the normal AP > Disbursement > Make Payment process, or choose a payment type such as credit card, ACH, wire, etc.  
  5. Post and pay the voucher as normal.

Option 2: Use a Quick Check for the Pre-Payment

The benefit of using a Quick Check is just as the name implies, it is quick.  The GL accounting is the same as above, but there is less opportunity for keeping all of the Voucher transactions together for audit/history. Refer to this article for creating a Quick Check: Enter and Print a Quick Check

On your Quick Check, you will want to use your Pre-Paid Expense Asset account (or other GL account as applicable) as in the Voucher example above.

Apply the Pre-Payment to Vendor's Invoice

Once you have received the Vendor's invoice for the pre-paid goods you can use the same Pre-Paid Expense Asset account (or other GL account as applicable) in place of the normal AP, Open or other Voucher payment method.

  1. Enter the Vendor's invoice as a Voucher
  2. The Voucher amount will be the Vendor's Invoice amount LESS the amount you pre-paid.  If you pre-paid in full, the Voucher Amount would be $0.00.  In the example below, our $500 pre-payment is being applied to a $1,000 invoice.  The Voucher Amount should reflect your 'Balance Due' for the invoice.
  3. Process the Expense (General Ledger tab) and/or PO Line Items as you would for any 'normal' Voucher.  Here you will want to expense the entire amount of the vendor's invoice.  
  4. On the GL Tab, enter the Pre-Paid Expense Asset account (or other GL account as applicable) and enter the amount of the deposit as a negative number.
  5. Post and pay (if applicable) the Voucher as normal.