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About Entries for Prepaid Deposit Transactions

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:

  1. A Prepaid Deposit is taken for $100.
  2. A $100 purchase is made.
  3. 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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