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Accounting for Prepaid Materials

Distributor steps for accounting for prepaid materials: set up a non-inventory Pre-paid Materials product mapped to an Other Asset account, create the prepay purchase, then relieve it with a -1 line on receipt. Requires v22.01+.

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Written by Bailey Naas-Thornton

Minimum Version Required: 22.01

Steps

To create a purchase for pre-paid materials:

  1. Create a new product called Pre-paid Materials
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  2. Map that product to a non-inventory product type
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  3. Map that product to an Other Asset account using Expense Account Maps
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  4. Create an inventory-type purchase for the amount of materials that are being prepaid using a Quantity of 1 and FOB/ExtPrice equal to the value being prepaid.
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To relieve a pre-paid balance when receiving inventory:

  1. Find the inventory purchase that has been recieved
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  2. Edit the purchase and add the non-inventory Pre-Paid Materials product to the purchase with a Quantity of -1 and FOB/ExtPrice equal to the value of the product being received
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  3. Confirm the Purchase total is zero and check the created journal entry to confirm that inventory value is being added and prepaid asset value is being relieved as expected.

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