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Linkasink
Linkasink
December 17, 2024
Question

Pre-Paid / Deposits for inventory

  • December 17, 2024
  • 1 reply
  • 0 views

We use Desktop Enterprise.

We send 50% as a deposit with our Purchase Orders for inventory. How can I set up a fake bank account that I can transfer (but have actually writen a check to the vendor) theese deposits so when the bills come I can pull from the deposit (50%) and then pay the balance out of our real bank account.

When i do an asset account, and I write the check, it shows as a negative number. I want it to show as a positive number. Example

PO XYXY total of the PO is 1000.00. I write a check for 50% deposit ($500). When I get the inventory I want to apply the 50% of the pre-paid deposit plus pay the balance. 

Using the accounts payable method, creates a negative number on the P&L, and we dont want that.

1 reply

FishingForAnswers
FishingForAnswers
December 17, 2024

@Linkasink  Should be as simple as using a Current Asset as the detail line on the 50% deposit check you are creating for the Vendor.

 

Per your example, this will cause $500.00 to move from the relevant bank account to the asset.

 

When you go to pay the remainder of the bill to the customer, create another check, but use -$500.00 on a detail line for the current asset.

 

This will allow you to then enter the full $1,000 on a second detail line for whichever account you're using to track inventory, reducing the amount coming out of your bank account for the second check to $500.

 

Total of $1,000 comes out of the checking account, $500 of which was briefly tied up in a current asset. Current asset gets lowered to $0, and you end up with the $1,000 in inventory.

FishingForAnswers
FishingForAnswers
December 17, 2024

Correcting this: "When you go to pay the remainder of the bill to the customer,..."

 

Customer should read vendor.

 

I should be hibernating.

M
MirriamM
December 17, 2024

Hello there, @Linkasink! It sounds like you're looking for the best way to track those 50% deposits on your purchase orders in QuickBooks Desktop Enterprise. I understand you want to keep track of these payments without affecting your P&L, and that using a standard asset account isn't giving you the desired result with the negative balance.

 

You're right, using a typical asset account for this will show a negative balance since you're reducing the account balance with the check. Let's explore a better way to handle this in QuickBooks:

 

Option 1: Liability Account for Deposits

 

Instead of an asset account, consider using a liability account specifically for tracking these deposits. Here's how it works:

 

  1. Create a new account: In your Chart of Accounts, create a new current liability account. You can name it something like "Prepaid Vendor Deposits" or "Inventory Deposits."
  2. Record the deposit: When you make the 50% deposit, use this liability account when writing the check. This will increase the liability account balance, reflecting the money you owe to the vendor.
  3. Apply the deposit to the bill: When the bill arrives, enter it as usual. Then, use the "Pay Bills" feature and select the vendor. You can then apply the credit from the "Prepaid Vendor Deposits" account towards the bill, reducing the amount you need to pay from your checking account.

 

This method accurately reflects that you've made a deposit and have a credit with the vendor, without affecting your P&L until the actual expense is incurred.

 

Option 2: Other Current Asset" with a Journal Entry

 

If you prefer to keep track of the deposit as an asset, you can still use an "Other Current Asset" account, but with an extra step:

 

  1. Create the asset account: Set up an "Other Current Asset" account as you initially tried.
  2. Record the deposit: When you write the check for the deposit, choose the "Other Current Asset" account. This will indeed show as a negative balance.
  3. Create a journal entry: To offset the negative balance and accurately reflect the deposit, you'll need to create a journal entry.
    • Debit the "Other Current Asset" account for the deposit amount.
    • Credit a temporary "holding" account (you can create a new one for this purpose). This will bring the asset account balance to zero.
  4. Apply the deposit: When the bill arrives, you can use the funds from the "holding" account to offset the bill.

 

This method might seem a bit more complex due to the journal entry, but it allows you to track the deposit as a positive asset while still accurately reflecting your finances.

 

Important Note: It's always a good idea to consult with your accountant to determine the best approach for your specific accounting needs and ensure it aligns with your preferred reporting methods.

 

I'm here to help you with any further questions or guide you through setting up these options in QuickBooks. Just let me know!

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