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  • Writer's pictureEH Lim

Advances paid to the supplier

Advance payment (a.k.a. deposit) is a payment issue from the buyer to the seller before the seller releases the goods. The request for the payment could be the buyer being new to the seller or the purchase amount exceeding the credit limit.


advances paid to the supplier


You can use the 'pay a deposit for order' option from the MoneyWorks purchase order to record an advance payment to the supplier. The order process adds a payment transaction with an advance payment item (linked to the advances paid to the supplier account), which debits the advances paid and credits the bank.


deposit


The order is then processed again with a 'receive goods with invoice' option when you have received the bill and goods from the supplier. The purchase invoice created by the system has the advance payment item auto-inserted after the last product item with a negative value to reduce the outstanding amount. The negative advance payment item debits the accounts payable and credits the advances paid.


You can use the ledger report or the account enquiry feature in MoneyWorks to monitor the advances paid account (a current asset type in home currency). It should not have balances once you have posted all the related transactions if they are in your home currency. You may use a general journal to adjust the difference to the exchange gain/loss account if there are home currency balances due to foreign currency transactions recorded at a different exchange rate.


You can still use the above payment and purchase invoice concept to record the advances paid if you are not using the orders in MoneyWorks. In this case, you have to monitor the advances manually (e.g. via the ledger report or a spreadsheet) since you do not have the purchase orders to help keep track of the advances paid.


MoneyWorks is an accounting software for small and growing businesses. Sign up for a product demo to find out more about the software.

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