Advance Payment to Supplier
Software: MoneyWorks accounting software
For those users who use the Purchase Order function in MoneyWorks, can select “Pay Deposit for Order” during process of Purchase Order to pay a deposit (advance payment) to your supplier.
As for those users who didn’t use Purchase Order function can consider to use the Payment method to pay a deposit (advance payment) to supplier.
Assuming you need to make an advance payment of $1,000.00 to ABC company from your Main Bank Account.
From MoneyWorks accounting software, create a new Payment transaction to ABC Company for the amount of $1,000.00 from the Main Bank. In this payment window, don’t select any account, item or invoices from Payment on Invoice tab.
When you try to save this payment transaction, MoneyWorks will prompt to enter Overpayment detail. You can use a Current Asset account (usually I will use Advance to Supplier account) to record this transaction. This is a suspense account that temporarily store the transaction.
There will be three transactions created:
Transaction One:
Debit Accounts Payable: 1,000.00
Credit Advance to Supplier: 869.57
Credit GST Paid: 130.43
Transaction Two:
Debit Advance to Supplier: 869.57
Debit GST Paid: 130.43
Credit Accounts Payable: 1,000.00
Transaction Three:
Debit Accounts Payable: 1,000.00
Credit Main Bank Account: 1,000.00
Transaction one and two are Purchase Invoice type, which are auto generated by MoneyWorks. Transaction Three is a Payment type, which you have created. GST Paid account was used because GST code was used in the Advance to Supplier account (Current Assets account).
You will see this Advance to Supplier transaction (as a Overpayment item) in your payment transaction window when you are making payment to your supplier. Thus, you can knock off this advance to supplier (deposit) with your actual bill received from this supplier or paid together with the balanced amount.