Outgoing payment

[koth]

Hi,

Scenario is,

1.Paid to vendor in advance by outgoing payment, for example 100

2. Raised AP Invoice not full payment, for example 90

Question:

1. How to adjust the balance 10
2. Is it will affect item cost

Thanks

 

[accountant100]

hi Koth, in my view:

1) the 10 will be treated as Prepayment (asset on Balance sheet) at period end;
2) the cost of item will be what was agreed between entities. Cost of item will by 90 in my view, and will only increase when a further invoice is received.

I would expect the entries to be:
1. Credit bank by 100, debit Vendor account by 100;
2. Credit vendor account by 90 when Invoice raised, and debit either asset or expense (depending on goods/service acquired).

I would need more info to give exact answer, i.e. why was Invoice only raised for 90? If only 90 worth of goods / services delivered to our entity by month end, then 10 would stay as prepayment.

Hope it helps!