Germany Down payment for fixed assets


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Hey everyone,

We made a contract with a vendor for several machines which will be delivered over a period of 12 months.

We have to make a down payment at T +0 and will then make the rest of the payments whenever we receive machines.

I am just not sure how I should book the downpayment for this? It is a prepayed asset?

Many thanks for any help.
 
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Fidget

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It's just a prepayment, or payment in advance, deposit in advance, whatever you want to call it, and it sits in the balance sheet. So journal entry for it will just be:

Dr: Deposit in advance (or whatever you want to call it)
Cr: Bank

Once you start taking ownership of the machines (and paying for them), just release the deposit in line with the agreement - might be released against the first invoice, or apportioned across several invoices as they come in.

If it's a non-refundable deposit in the event that you cancel, it would be released in full to the P&L as a 'fruitless payment' - a payment you're legally obliged to suffer without having received any goods/services for it.
 

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