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16My company purchases a lot of materials in which we are required to place a deposit/prepayment. For example 50% at invoice 50% upon receipt. We are currently using the method below (screenshot #1) on the right hand side where individuals select the prepayment category ID, apply the prepayment, etc. (I am part of accounting, not procurement so don't know the exact process). This video outlines the procurement side of it if it helps: https://www.youtube.com/watch?v=4LW2QTBA4TU
My question is how using this prepayment function post to the GL. For example, when the initial prepayment is made, let say 50%, GL posting would be:
Dr Prepaid expense $XXX
Cr Cash /AP $XXX
Cr Cash /AP $XXX
My question then is what happens then when the remaining 50% is invoiced/paid/applied and/or the purchase is received? Does the amount that was placed in a prepaid expense account above get reversed automatically and placed into it final expense account at 100% of the invoice? Do i have to monitor the prepaid account and reclass accordingly as items come in?
Please help!!!
Screenshot #1
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