Vendor Prepayments

What is the best way to deal with vendor prepayments in QB?

Client wrote a cheque for $1,900 to a vendor for a leasehold improvements item. There was no paperwork and I was advised to book the cheque to "Other Current Assets" a/c "Vendor Deposits".

I have now been handed the invoice which shows the full amount of $3,800 less the deposit of $1,900, with a balance of $1,900, which has now been paid with a separate cheque.

Can this all be done through payables and the vendor a/c keeping it easily trackable? I can't see how as the first cheque was entered as a journal entry and they are in different months.

Thank you for any assistance,

Confused and clearly "green" :)

image of fancy scroll lines

Click on this link to see if the information on How to Record a Deposit on a Purchase helps you out.

The link gives you two options ... for the future.

As you have already booked the prepayment in a previous accounting period, here is what I would do.

Make a journal entry moving the prepayment to accounts payable in the current period. Here's the journal entry:

Debit Accounts Payable (you'll need to enter the supplier's name)

Credit Vendor Deposits

Then go into bill payments and apply the credit to the appropriate invoice through the "setting credits" button.

Let me know how it works out.

Comments for Vendor Prepayments

Average Rating starstarstarstarstar

Click here to add your own comments

Sep 24, 2010
Good Internal Control
by: Bookkeeping Essentials

I forgot to mention that I was assuming you were entering all your invoices through Enter BIlls ... and paying all invoices through Pay Bills not Write Cheques.

This practice provides good internal control and will make your vendor reconciliations easier to do. See point number two in my article on internal controls.

I would enter the invoice through Enter Bills ... coding the bill to leasehold improvements.

Then if you paid the invoice already by writing a cheque, edit the cheque and make sure it is coded to Accounts Payable.

You will then have to go in and apply the credits.

Sep 28, 2010
Thank you!
by: Zena

This was great advice. Thank you ever so much.

Click here to add your own comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Learning QuickBooks.


Back to top