We have prepaid a suppliers bill. Two months later, the goods arrived, so entered the bill to update inventory. How to show the payment against the Bill?

It can not be an expense and inventory, which is an asset.

Think of it from the vendors point of view, you prepaid and that set a customer credit. The vendor owes you what you paid for.

So on your side of things, you should enter a prepayment as a vendor credit.

Find the original transaction, change the expense account to accounts payable and select the vendor name. That sets a vendor credit.

Then enter the bill for inventory using the item details part of the bill. When you are done entering inventory save and use pay bills, select this bill and click apply credits to pay it.