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    Recording Advance Payments to Vendors on QBO

    recording-advance-payments-to-vendors-on-quickbooks-online-bizwise

    Some vendors might ask you to pay a portion of the price before the complete delivery of a product or service. To record these prepayments or deposits on Quickbooks Online, you can use either of these two accounts:

    • Accounts Payable (a Liability)
    • Prepaid Asset (an Asset)

    Using Prepaid Asset to track a vendor prepayment

    First, you need to have a Prepaid Asset account set up on Quickbooks. If you don’t have one yet, here’s how you can create a Prepaid Asset account on Quickbooks:

    1. Go to the Accounting menu, then hover to the Chart of Accounts tab.
    2. On the upper right corner, select New.
    3. Fill out as much as you can All fields with an asterisk is required.
      • Save account under: Other Current Assets
      • Tax for section: Prepaid Expenses
      • Account name: Prepaid Asset or anything you want to name this account
      • Description: This field is optional
    4. Click Save.

    Now, we are ready to track your vendor prepayment.

    A. If you pay your vendors using ACH and you have your bank account linked to Quickbooks, you can follow these steps:

    1. Go to the Banking Center and check if the transaction has been downloaded through the bank feed already.
    2. Once it appears, categorize the transaction.
      • Payee: choose the vendor you made an advance payment to
      • Category: the Prepaid Asset account you just created

    B. If you pay your vendors using a check, you can follow these steps:

    1. On the upper left corner, click + New, then select Checks under the VENDORS column.
    2. Fill out all the necessary fields:
      • Payee
      • Payment date
      • Payment amount: the advance payment you made to the vendor
      • Category: the Prepaid Asset account you just created
    3. Click Save & Close.

    You can do this each time you make advance payments to your vendor, increasing the balance of your Prepaid Asset account until you are ready to pay the final bill.

    Enter the bill when the items arrive or when the service has been completed.

    To close the Prepaid Asset account and enter the actual bill into Quickbooks Online:

    1. Go to the Vendors page, then select Bills under the dropdown menu for New transaction.
    2. Go to the Expenses tab, then select the OCA account.
      1. Enter the amount of the prepayment as a negative value.
      2. 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.
      3. Select Save & Close.
    3. Pay the bill balance.
      1. Go to the Vendors menu, then select Pay Bills.
      2. Select the bill you entered, then Pay Selected Bills. QuickBooks will then create a Bill Payment Check for the balance.

    View existing prepayments

    1. Go to the Reports menu, then select Vendors & Payables and then Vendor Balance Detail.
    2. Select Customize Report, then go to the Display tab.
    3. Select the desired date range for the report.
    4. Go to the Filters tab, then select Account from the list.
    5. From the Account drop-down, select the asset account created to track prepayment amounts.
    6. Select OK.

    https://wallners-quickbooks.weebly.com/uploads/2/2/9/6/22960132/prepayments_for_purchase_orders.pdf