Advance Payment or Deposits


The following instruction assumes you receive an advance payment from one of your customers before you have issued a sales invoice and that the advance and the final invoice are in the same tax year.

Step 1: Create and entry for the Advance

Enter the advance or deposit as a Receive Money transaction, with the Type being a General Receipt. If you don't have an appropriate Customer Advances / Prepaid Income account to select in the transaction, consider creating one with an Account Type of Current Liability in the Chart of Accounts. At this point, you are not recording the receipt against a specific invoice as the service or sale has not been made. Please note that the advance will show up in all your reports except the Aged Receivables report.

Step 2: Create and issue the Sales Invoice

A sales invoice should be created and issued to your customer once the goods have been dispatched or the services rendered.

Step 3: Apply the original advance to the Sales Invoice

Edit the original Receive Money transaction (created in Step 1) and change the Type to Invoice Receipt. Allocate the amount against the sales invoice entered in Step 2. The Type field is usually visible above the Transaction Date field. If it is not visible, then it is probably because the bank transaction is marked as reconciled. The Type field can be made visible again by un-reconciling the bank transaction.

Supplier Advances

If you have made an advance payment to your supplier, the same steps apply but replace as follows

Step 1: Receive Money becomes Spend Money with Type being General Payment. Create a Supplier Advances (or use the Prepayments) account in the Chart of Accounts with Account Type of Current Assets.

Step 2: Enter a Purchase Invoice received from your supplier.

Step 3: Edit the original Spend Money transaction and allocate against the Purchase Invoice.

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