Processing a Vendor Prepayment

In some situations you may need to pre-pay a vendor for merchandise or services.  This procedure describes how a vendor prepayment transaction can be processed on the system.

      Determine the vendor and amount that the prepayment should be created for.

      Verify that you have a vendor prepayments account already set up in the General Ledger.  Create the account if it does not already exist.

      Using the correct vendor record, enter a positive accounts payable invoice for the amount of the prepayment into the system.  Charge the prepayment to the Vendor Prepayment Account in the General Ledger (this will have the effect of debiting the prepayment account and crediting accounts payable).

      Using the same vendor record, enter a negative AP invoice (again for the amount of the prepayment), into the system.  Charge the negative invoice to the same Vendor Prepayment Account.  Once this transaction is processed, the Vendor Prepayment Account should show a zero balance.

      Process a computer generated or manual payment transaction for the positive prepayment invoice.  Do not include the negative invoice in the payment.  This transaction will close the positive invoice for the vendor and allow you to send the payment to the vendor.  Once this transaction is processed, the prepayment is complete and a negative invoice for the amount of the prepayment is left open on the Vendor Account.

      Later, when the actual invoice from the vendor is received, it should be entered into accounts payable in the normal fashion.  This invoice can be partially or completely closed by applying the vendor credit memo (negative invoice) against the open balance.  If the prepayment and the invoice amount are not the same and the net amount is positive, you can also include the invoice and credit memo in a payment transaction and both of the invoices will be closed when the payment transaction is processed.


Processing Invoices that have been paid prior to entry