17 Nov Vendor Prepayments and Deposits
There are two alternatives for recording vendor prepayments and deposits. There is a quick and easy approach, and then there is the one that complies with GAAP (Generally Accepted Accounting Principles).
The easiest is:
1. When a prepatment or deposit is due, enter a check and code the transaction to the Accounts Payable account on the expense tab. This will show as an overpayment to the vendor on the Vendor & Payable reports.
2. Enter the bill for the entire amount of the expenditure when the goods or services are received.
3. Use the pay bills feature to “link” the two transactions together and, if appropriate, pay any remainder due.
The GAAP alternative is:
1. Create a new account for the tracking of the asset. Lists > Chart of Accounts > Account > New > Other Current Asset > Vendor Deposits.
2. As checks are written or bills are entered, use this new account on the expense tab. (It is also possible, if desired, to create a new item coded to the account created in step 1 above for use on the items tab instead.)
3. Once the job is complete, create the final check or bill. The check or bill detail should be the full amount of the purchase, with an additional line for the deposit item or account. The deposit is the amount that has already been paid entered as a negative amount. The result is a bill with a total equal to the net amount now currently due.
QBRA-2003: Banking > Write Checks
TRICK: When using the later approach, to ensure that the prepayment amounts balance, the Vendor Deposits account can be reconciled by choosing Banking > Reconcile > Vendor Deposits. The opening balance and the ending balance should both be zero.