...
- A Prepaid Deposit is taken for $100.
- A $100 purchase is made.
- A $100 payment is made using the Credit Memo established from the order of the prepaid deposit product.
Prepaid Deposit
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Zero-Balance Order
Since the price of the order is zero, there is no GL activity from the order. When a payment is made on this zero-balance order, it creates a credit memo against the zero-balanced order. The following tables represent the payment GL entries.
Account | Debit | Credit |
A/RCash | $50$100.00 | Sales |
Prepaid Liability |
| $50$100.00 |
The following GL entries are generated by the generated for an Order that will use the prepaid deposit credit memo payment:
Account | Debit | CreditCash |
A/R | $50$100.00 |
|
A/RSales |
| $50$100.00 |
GL entries generated for Payment with the credit memo:
Account | Debit | Credit | |
A/R | $50Prepaid Liability | $100.00 | Cash |
A/R |
| $50$100.00 |
Result
All entries cancel. No GL activity.
This second scenario would normally result in the entries cancelling and therefore not have any GL activity. However, if the A/R accounts are different for the product on the regular order versus the Credit Memo order, only the Cash entries will cancel. This will result inAfter this sequence of transactions, you can see that the entries to Prepaid Liability cancel and the entries to AR cancel. The result:
Account | Debit | Credit | |
Credit Memo A/R Account | $50Cash | $100.00 |
|
Regular Order A/R AccountSales |
| $50$100.00 |