Record supplier deposits and advances

Supplier deposits and advances are funds paid by a business to a supplier before they have been earned. While the funds may be in the supplier’s hands, they are actually being held in trust for the business that pays the deposit and represent a liability the supplier must eventually either repay or convert to income by completion of the economic activity for which they are intended. Some examples include:

Accounting for deposits and advances

Two essential facts must be recorded for every deposit:

In Manager, both facts are recorded simultaneously when the deposit or advance is paid out. To record payment of a deposit, go to the Bank Accounts or Cash Accounts tab. Select Spend Money from the New Bank Transaction or New Cash Transaction dropdown list:

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Complete the payment form as you would for any other payment. Leave the Item field blank. Select Accounts payable and the supplier’s subaccount. Leave the Invoice field blank. A quantity is not required, because no inventory items or billable items are involved with a deposit. You may simply enter the total deposit in the Unit price field. However, if you wish, enter the quantity and unit price and Manager will calculate a total amount:

Click Create to finish.

Deposits, even those involving calculations with quantities and unit prices, have no impact on inventory values or quantities because no inventory item is designated.

When payments are entered under Bank Transactions, no Reference number is generated, because the financial institution usually assigns a reference number. But when entered under Cash Accounts, a Reference is automatically assigned. Manager finds the highest previous integer value and adds 1.

Using deposits and advances

The payment will now be deducted from the applicable bank or cash account’s balance. If from a bank account and marked as pending, it will show in the Pending withdrawals column under the Bank Accounts tab:

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The deposit also reduces the total Accounts payable balance, though the impact of a specific deposit may be obscured on the Balance Sheet if other amounts are owed to any supplier:

To view specific information about supplier deposits, you must first drill down by clicking the Accounts payable balance and locating the supplier’s account Balance:

Clicking on the balance, you can see transactions contributing to it, including the recent deposit payment:

You can do the same thing in the Suppliers tab, with identical results.

Whenever a purchase invoice is created for a supplier, any available net debit in that supplier’s Accounts payable balance will be automatically applied, reducing the balance due on the new purchase invoice.

Deposits and advances cannot be applied on purchases recorded only via cash payments. Such transactions are not processed through Accounts payable, so Manager cannot apply any available balance. If you purchase from a supplier on a cash-and-carry basis, but wish to apply an existing deposit or advance, you must create and pay off a purchase invoice in separate transactions.



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