QuickBooks | Advance payment to supplier
Software: Quickbooks accounting software
If you have received the supplier’s bill before the goods received, you should not convert the Purchase Order to Bill. Instead, you should consider to record the bill from the supplier and park it to the “Advance to Supplier” account. The “Advance to Supplier” account (You may consider to use “Stock in Transit” or other account name) is an Other Current Asset type of account.
The double entry for this Enter Bill transaction will be:
Debit Advance to Supplier account
Credit Accounts Payable account
When goods received, you convert the Purchase Order to Bill. This will update the stock on hand and the double entry for this Enter Bill transaction will be:
Debit Inventory Assets account
Credit Accounts Payable account
From the above, the Accounts Payable account has been credited twice (one is for the advance payment and the other is when the actual goods received); you need to record a Credit Note (or pass a General Journal) to offset the additional amount which has been credited to the Accounts Payable account.
The double entry for the supplier Credit Note (or General Journal) should be:
Debit Accounts Payable account
Credit Advance to Supplier account.
The Advance to Supplier account should be zero in balance as it is just a temporary account to hold the value of the stock in transit.