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Dynamics 365 Community / Forums / Finance | Project Operations, Human Resources, ... / Purchase Order Prepaym...
Finance | Project Operations, Human Resources, ...
Suggested Answer

Purchase Order Prepayments

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Posted on by DanielGarcia 16
My 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
 
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
 
 
I have the same question (0)
  • Hana Xue Profile Picture
    Hana Xue Microsoft Employee on at
    Hi,
    This blog explains the processing of 50% prepayment on purchase orders, you can check this blog for more information. https://www.sikich.com/insight/understanding-and-processing-purchase-order-prepayments-in-d365/
    Best Regards,
    Hana
     
  • Suggested answer
    Gaurangkumar Jani Profile Picture
    Gaurangkumar Jani 4,534 User Group Leader on at
    Hi there,
     
    this is standard process of system. System will adjust your 50% payment on invoice entry so default balance will be 50% only.
     
    Regarding the accounting entry, system pass following entries on each action:
     
    • On Prepayment invoice Booking:
      • Dr Prepayment Account (As per Configuration in Inventory posting profile > PO)
      • Cr Trade Payable (Vendor Posting Profile)
    • On prepayment posting:
      • Dr Trade Payable (Vendor Posting Profile)
      • Cr Bank (Payment)
    • On actual Invoice booking
      • Dr Trade Payable (Vendor Posting Profile)
      • Cr Prepayment Account (As per Configuration in Inventory posting profile > PO)
    For detailed procedure please go through following document:
     
    Thanks,
    Gaurangkumar Jani
     
     
     
  • Suggested answer
    BillurSamdancioglu Profile Picture
    BillurSamdancioglu 19,703 Most Valuable Professional on at
    When you invoice the transaction, then the prepayment is reversed.

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