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Customer and Vendor Prepayment Posting - Voucher Entry Creation

Overview​

Prepayment posting in the General Ledger module creates journal entries for advance payments between customers and vendors. The system handles both customer prepayments (deposits received) and vendor prepayments (advance payments made) through integrated posting strategies. This document explains what entries are created for each scenario and how prepayments are applied to final invoices.

Business Concept: Prepayment as a Deposit​

In the prepayment process, buyers make initial partial payments to secure goods, services, or contracts. This partial payment is often referred to as a deposit. It can be either a percentage or a fixed amount of the total value of the order. The prepayment invoice functions similarly to a billing document, with the final invoice issued later reflecting the full amount of the order.

Prepayment Process Flow​

Customer Prepayment Posting Scenarios​

Example: Customer Prepayment Process​

Business Scenario:

  • Customer places an order for $10,000
  • Customer agrees to pay $3,000 as a prepayment (30%)
  • Final invoice issued after goods/services are delivered

1. Prepayment Invoice Creation​

Voucher Entries Created:

DR  Accounts Receivable - Customer    $3,000   (Customer owes prepayment)
    CR  Customer Prepayment (Deposit)     $3,000   (Liability - customer deposit)

Business Impact:

  • Creates receivable for prepayment amount
  • Records liability representing customer deposit held

2. Payment of Prepayment Invoice​

When Customer Pays Prepayment:

DR  Cash/Bank Account                 $3,000   (Cash received)
    CR  Accounts Receivable - Customer    $3,000   (Clears prepayment receivable)

Business Impact:

  • Cash received and recorded
  • Prepayment receivable cleared
  • Customer deposit liability remains

3. Final Customer Invoice Creation​

When Goods/Services Delivered:

DR  Accounts Receivable - Customer    $10,000  (Full order amount)
    CR  Revenue - Products/Services       $10,000  (Revenue recognition)

Business Impact:

  • Full revenue recognized upon delivery
  • New receivable created for total amount

4. Apply Prepayment to Final Invoice​

Automatic Prepayment Application:

DR  Customer Prepayment (Deposit)     $3,000   (Clears deposit liability)
    CR  Accounts Receivable - Customer    $3,000   (Reduces final invoice balance)

Business Impact:

  • Deposit liability cleared
  • Customer's outstanding balance reduced to $7,000 ($10,000 - $3,000)
  • Customer pays remaining $7,000

Vendor Prepayment Posting Scenarios​

Example: Vendor Prepayment Process​

Business Scenario:

  • Company places purchase order for $15,000
  • Company pays $5,000 as advance payment to vendor
  • Final invoice received after goods/services are delivered

1. Vendor Prepayment Payment​

When Company Pays Advance:

DR  Vendor Prepayment (Asset)         $5,000   (Prepaid expense asset)
    CR  Cash/Bank Account                 $5,000   (Cash paid out)

Business Impact:

  • Creates prepaid expense asset
  • Cash outflow recorded

2. Final Vendor Invoice Received​

When Goods/Services Delivered:

DR  Inventory/Expense Accounts        $15,000  (Full purchase amount)
    CR  Accounts Payable - Vendor         $15,000  (Vendor liability)

Business Impact:

  • Full expense/inventory recorded
  • Accounts payable created for total amount

3. Apply Prepayment to Final Invoice​

Automatic Prepayment Application:

DR  Accounts Payable - Vendor         $5,000   (Reduces vendor liability)
    CR  Vendor Prepayment (Asset)        $5,000   (Clears prepaid asset)

Business Impact:

  • Prepaid asset cleared
  • Vendor liability reduced to $10,000 ($15,000 - $5,000)
  • Company pays remaining $10,000

Overview of the Prepayment Invoice Process​

The process for customer prepayment invoicing includes the following steps:

  1. Define a prepayment value on the sales order
  2. Confirm and post a prepayment invoice
  3. Settle the prepayment invoice
  4. Apply the prepayment invoice to the final invoice

Create a Prepayment Proposal​

When you create a sales order, you can define the prepayment amount by following these steps:

  1. Navigate to Prepayment Section

    • From the sales order, go to Invoice > Prepayment, and select Payment proposal

  2. Select the Prepayment Type:

    Percentage Option:

    • If you select Percentage, the Prepayment value field is enabled
    • This field represents the percentage of the total sales order amount required as a prepayment
    • The Total prepayment amount field shows the calculated prepayment amount

    Fixed Option:

    • If you select Fixed, the Total prepayment amount field is enabled
    • You manually enter the prepayment amount
    • The amount entered cannot exceed the sales order amount

  3. Configure Sales Category

    • In the Sales category field, select the appropriate sales category that determines the revenue account according to posting settings
    • By default, the sales category is automatically populated with the value chosen in Accounts receivable parameters

Generate a Prepayment Invoice​

After the prepayment proposal is confirmed, generate the prepayment invoice by following these steps:

  1. Access Prepayment Invoice

    • Go to Invoice > Prepayment, and select Prepayment invoice

  2. Review and Post Invoice

    • Review the prepayment invoice details
    • The page shows information about the overall prepayment invoice, including:
      • Customer invoice account
      • Posting and due dates
      • Prepayment invoice number
      • Prepayment status
      • Prepayment amount

  3. Post the Invoice

    • Select Post
    • The open customer transaction is created
    • The status of the prepayment invoice changes to Pending

  4. Reversal Option (if needed)

    • After the transaction is posted, you can reverse this transaction using the Reverse transaction button on the action pane
    • You can select the Reversal posting date, Reason code, and Reason comment before the reversal is posted

Settle the Prepayment Invoice​

When you receive the payment for the prepayment:

  1. Post Customer Payment

    • The customer payment journal is posted to settle the prepayment invoice amount

  2. Status Update

    • After prepayment invoice settlement, the status of the prepayment invoice changes to Received
    • Apply prepayment option becomes available

Post the Final Invoice and Apply the Prepayment​

  1. Apply Prepayment to Final Invoice

    • From the Sales order, click Apply prepayment
    • In the Select prepayments to apply list, select the prepayment
    • Select Apply prepayment

  2. Automated Settlement Processing

    • After the sales order invoice is posted, the selected prepayment is applied to the invoice when the Automated prepayment settlement posting background process is successfully run
    • If Synchronous prepayment settlement is enabled in Accounts receivable parameters, this step happens in real-time

  3. Final Settlement

    • The remaining amount of the sales order invoice can be settled through a customer payment journal and shows the outstanding amount
    • As the final invoice is issued, expand the Prepayment invoice FastTab to verify the application of the prepayment

Prepayment Configuration and Setup​

Prepayment Proposal Creation​

From Sales/Purchase Order:

  1. Navigate to Prepayment Section

    • Sales Order: Invoice > Prepayment > Payment proposal
    • Purchase Order: Invoice > Prepayment > Payment proposal

  2. Select Prepayment Type:

    • Percentage: Specify percentage of total order amount
    • Fixed: Enter specific prepayment amount

  3. Configure Sales Category (Customer Prepayments)

    • Determines revenue account for posting
    • Auto-populated from Accounts Receivable parameters

Prepayment Amount Calculation​

Prepayment TypeConfigurationExample
PercentageEnter percentage (e.g., 30%)$10,000 order × 30% = $3,000
FixedEnter fixed amount$3,000 (cannot exceed order total)

Detailed Posting Process​

Customer Prepayment Process​

Step 1: Create Prepayment Proposal​

Order Amount: $10,000
Prepayment Type: Percentage (30%)
Calculated Amount: $3,000

Step 2: Generate and Post Prepayment Invoice​

Prepayment Invoice #: PREP-001
Amount: $3,000
Status: Pending → Posted

Step 3: Customer Payment Settlement​

Payment Method: Bank Transfer
Amount: $3,000
Status: Pending → Received

Step 4: Final Invoice and Application​

Final Invoice #: INV-001
Total Amount: $10,000
Prepayment Applied: $3,000
Customer Owes: $7,000

Vendor Prepayment Process​

Step 1: Create Prepayment Proposal​

Purchase Order: $15,000
Prepayment Type: Fixed
Amount: $5,000

Step 2: Make Advance Payment​

Payment Method: Wire Transfer
Amount: $5,000
Status: Paid

Step 3: Receive Final Invoice​

Vendor Invoice #: VINV-001
Total Amount: $15,000
Prepayment Applied: $5,000
Company Owes: $10,000

Account Resolution and Posting Types​

Customer Prepayment Accounts​

Entry TypeAccount TypePosting TypeDescription
AR (Prepayment)CustomerCustomer PrepaymentReceivable for deposit
Deposit LiabilityGL AccountCustomer DepositLiability for deposit held
Cash ReceiptGL AccountCashCash/bank account
RevenueGL AccountSales RevenueRevenue recognition

Vendor Prepayment Accounts​

Entry TypeAccount TypePosting TypeDescription
Prepaid AssetGL AccountVendor PrepaymentPrepaid expense asset
Cash PaymentGL AccountCashCash/bank account
AP (Final)VendorPurchase AccrualPayable for full amount
Expense/InventoryGL AccountPurchase/InventoryExpense or asset account

Prepayment Status Management​

Customer Prepayment Statuses​

StatusDescriptionNext Action
PendingPrepayment invoice posted, awaiting paymentCustomer payment
ReceivedPayment received and settledApply to final invoice
AppliedApplied to final invoiceCustomer pays balance
ClosedFully processed and settledNone

Vendor Prepayment Statuses​

StatusDescriptionNext Action
PaidAdvance payment made to vendorAwait delivery/final invoice
AppliedApplied to final vendor invoicePay remaining balance
ClosedFully processed and settledNone

Prepayment Reversal and Adjustments​

Customer Prepayment Reversal​

When Prepayment Needs to be Reversed:

DR  Customer Prepayment (Deposit)     $3,000   (Clears deposit liability)
    CR  Accounts Receivable - Customer    $3,000   (Reverses original receivable)

Business Scenarios:

  • Order cancellation before delivery
  • Customer requests prepayment refund
  • Order amount changes significantly

Vendor Prepayment Reversal​

When Advance Payment Needs to be Reversed:

DR  Cash/Bank Account                 $5,000   (Refund received)
    CR  Vendor Prepayment (Asset)        $5,000   (Clears prepaid asset)

Business Scenarios:

  • Purchase order cancellation
  • Vendor returns advance payment
  • Order specifications changed

Automated vs Manual Processing​

Automated Prepayment Settlement​

Configuration Options:

  • Synchronous Settlement: Real-time application during final invoice posting
  • Background Process: Automated settlement via batch processing
  • Manual Application: User-controlled prepayment application

Settlement Processing​

Technical References​

Business Process References​

Cross-Reference Documentation​

Last Updated: [2025-09-19] | Version: 1.0 | Status: Active Development