About Entries for Prepaid Deposit Transactions
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Assume for this example that a Prepaid Liability account is configured as the AR account in the prepaid deposit product. This following example shows the resulting GL Entries from a transaction that does the following:
- 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 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 |
Cash | $100.00 |
|
Prepaid Liability |
| $100.00 |
GL entries generated for an Order that will use the prepaid deposit credit memo:
Account | Debit | Credit |
A/R | $100.00 |
|
Sales |
| $100.00 |
GL entries generated for Payment with the credit memo:
Account | Debit | Credit |
Prepaid Liability | $100.00 |
|
A/R |
| $100.00 |
After 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 |
Cash | $100.00 |
|
Sales |
| $100.00 |
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