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This text refers to program version 4.3  

On Account Payments and Prepayments - Prepayments

You will usually use a Prepayment Payment when you have paid a deposit to a Supplier against a Purchase Order, before you have received an Invoice for that deposit.

In the Customer records for every Supplier to whom you are likely to pay deposits, switch on the On Account check box on the 'Company' card. Then specify the separate control or suspense Account number on the 'Exchange Rate' card of the Account Usage P/L setting, using the On Account A/C field.

When you issue a Prepayment to a Supplier, you should record it in the Payment register. Leave the Purchase Invoice Number blank, and instead, specify a Prepayment Number on flip D. This can be a number of your own generation or, preferably, the number allocated to the pre-payment by the Supplier.

The special Account for on account Suppliers used in this example is 755 since raising a Prepayment creates an asset. The Nominal Ledger Transaction generated when the Payment is approved and saved will debit the Sent Value to this Account. The Credit Account is taken from the Payment Mode as usual:

When the Purchase Invoice arrives, you can allocate the Prepayment to that Invoice so that it can be treated as paid.

Enter the Invoice to the Purchase Invoice register in the usual way. When you enter the Supplier Number, you will be warned that an open Prepayment (i.e. one that has not yet been allocated to an Invoice) exists in the Supplier's name. This will remind you to allocate the Prepayment to the Purchase Invoice. Complete the grid area in the usual way.

When you are certain that the Purchase Invoice is complete, select 'Connect to Prepayment' from the Operations menu. A new row is inserted as the first row of the grid area, containing a reference to the Prepayment. Enter the Prepayment Number of the Payment row representing the Prepayment, using 'Paste Special' if necessary to bring up a list of open (unallocated) Prepayments. This list shows open Payment rows with a Prepayment Number and without an Invoice Number. Payment rows that do not have a Prepayment Number or an Invoice Number will not be in this list: please refer to the On Account Payments page for details of allocating these to Purchase Invoices.

Select a Prepayment from the list by double-clicking. The Prepayment Number will be shown in the special Prepayment row. An amount will also be shown. This will be the whole open value of the Prepayment, or the Invoice TOTAL (from the Purchase Invoice header) whichever is the lower. This figure will be debited to the Creditor Account when you approve and save the Purchase Invoice, so the Invoice will be treated as paid to that extent.

When you approve the Purchase Invoice, the consequent Nominal Ledger Transaction will combine the usual Invoice postings with those incurred by allocating a Payment against the Invoice. This maintains a correct Purchase Ledger for the Supplier:

The status of the Purchase Invoice and of the Prepayment will now be as follows:

1. if the Purchase Invoice value is the same as the whole open value of the Prepayment, the Purchase Invoice is treated as paid and will not appear in the Open Supplier Customer Statement. The Prepayment is fully used up by the Purchase Invoice, so it is no longer regarded as open;
   

2. if the Purchase Invoice value is less than the whole open value of the Prepayment, the Purchase Invoice is treated as paid and will not appear in any reports showing Open Purchase Invoices. The Prepayment is not fully used up by the Purchase Invoice, so the remaining outstanding amount is still regarded as open; or
   

3. if the Purchase Invoice value is more than the whole open value of the Prepayment, the Purchase Invoice is treated as part-paid. The Prepayment is fully used up by the Purchase Invoice, so it is no longer regarded as open.

Note that it is important to ensure that the Invoice is complete before selecting 'Connect to Prepayment' from the Operations menu. The function calculates the amount shown in the special Prepayment row: this is the amount that will be debited to the Creditor Account and therefore the amount that goes towards paying off the Invoice. If the Invoice is incomplete when the function is selected to the extent that the TOTAL (as shown in the header, not as calculated from the Invoice rows) is zero (or is otherwise incorrect), this will be the amount shown in the special Prepayment row. When the Purchase Invoice is completed, approved and saved, this is the figure that will be debited to the Creditor Account. So the Purchase Invoice will not be paid off, and the Prepayment will remain open.

If you select 'Connect to Prepayment' before the Purchase Invoice is complete (it may be that a late change is required) you can either change the amount shown in the special Prepayment row or you can delete the special Prepayment row and use 'Connect to Prepayment' once again. If you choose the former option, you will be prevented from entering an amount that is greater than the open value of the Prepayment, or greater than the Purchase Invoice total.

!	Ensure the TOTAL of the Purchase Invoice is correct before using 'Connect to Prepayment'.

If you have used 'Connect to Prepayment' and you are unable to save the Invoice, the probable reason is that the date of the Prepayment is later than that of the Invoice. The date of the Prepayment must be the same as or earlier than that of the Invoice.

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