How to handle prepayment amount being over the final invoicing in PO

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Posted on by J_Lee

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Scenario Summary
PO Total: USD $1,000
Prepayment Settled: USD $500
1st Invoice: USD $700 (prepayment not applied) → payment settled
Final Invoice: USD $400
Issue: Prepayment exceeds remaining invoice amount by USD $100

Please advise how to handle such unexpected situation. Also, how to avoid such situation to be happened.

BTW, please advise what the accounting entries in PO with prepayment are.

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Dynamics 365 Finance

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Verified answer

Zain Mehmood 4,173 Most Valuable Professional on at

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How to handle prepayment amount being over the final invoicing in PO

Hi,

In this case, since the prepayment wasn’t applied to the first invoice, it led to an over-application on the final invoice. To fix this:

You can leave the excess as a vendor credit or request a refund.

For future cases, ensure prepayments are correctly applied at invoice posting.

Consider setting up process checks to avoid posting invoices without applying the available prepayment.

Accounting entries:

On prepayment: Dr. Prepayment A/C, Cr. Vendor A/P

On invoice posting with prepayment applied: Dr. A/P, Cr. Prepayment A/C

Hope that helps!

Zain

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