Cash or accrual?

Accrual, Yes prepay would be the proper method.  Applies to the customer's account, debits cash, hits the deposit report.

Once invoiced, then receive payment, clicking both prepay and invoice to close the open invoice against the prepayment.  Amount equals 0.00, remarks or check number “post/close zero”, pick standard bank account as amount is zero.  

The downside(s) of using prepayments:

1.  They don't show on the customer account inquiry page.  The total owed reflects the payment, but unless you notice that the open invoice amount doesn't match that total, it's not obvious that there's a prepayment.

2.  If you try and open the payment entry after you've applied it to the invoice, the program says you can't view the payment.   

Just another frustrating, nonsensical part of Sage.

This makes no sense.  When a deposit (prepayment in Sage language) is taken from a customer, It should debit cash and credit a liability account (Customer Deposits??).  Deposits amounts should be tracked as part of a/r but should be identified as a separate number.  When an invoice is generated down the road, you should be able to "apply" the deposit directly on the invoice so the customer sees the total invoice minus the deposit.

I am considering switching from Sage BusinessWorks to Sage 50 accounting, but this one issue may prevent me from doing so.  BusinessWorks handles this beautifully.  My a/r report shows each customer's a/r balance and deposits as separate numbers and the totals of each category flow to the g/l as separate figures.

It is very frustrating that Sage 50 accounting cannot handle this simple task.  Am I missing something?

This is the process to making a prepayment: 

This is the Receipt of money.  This deposits the money in you account.  The prepayment box is checked.  It is going to Accounts Receivable and Cash.  It is not taken to Income at this time.  This would be in lieu of "customer deposits" because it will show on the Aged Receivables and in the Customer Management Tab as a prepayment. 

If you can not see the GL account number go to the Options tab > Global and uncheck the button to hide GL account numbers for AR. 

The receipt is showing on the Customer Management Tab. 

It is showing on Accounts Receivables.  If you go to columns you can add the status column to show it is a prepay. 

It can be applied to any payment: 

New invoice with credit applied: 

I used the Customer Management Page for much of the information above.  Please view my youtube video to learn more about this feature of Sage 50.

https://youtu.be/KHTcC0Jm3vo

I believe this worked properly.  If you like what you see, please feel free to visit our website. We sell Sage 50 accounting software and we offer support. We also offer many products that work with Sage 50, including low cost checks and forms.   All of our solutions work together. 

Shirley Byard, Master Certified Consultant, BestBusinessStrategies.com  [email protected]

Thank you for your information.  The issue for me is that the prepayment is posted directly to a/r as a negative.  I am looking for prepayments to be credited to a liability account (customer deposits) until the customer is invoiced for the goods.  At that time, the sales account will be credited and a/r and the liability account will be debited.  It is important for me to be able to see a total of all deposits (prepayments) at any given time.  Do you know if there is a report that would total the a/r and the prepayments as separate figures?  

I just tested this.  You don't have to have the prepayment amount go to the AR account,  You can actually take it to any account you would like.  

On the top of the AR report (options) you can modify the account number you anyone you would like to view and in your case, it would pull up a list of prepayments.  Sweet!  Once you modify the options for you prepayment report, you could save it.  It would always be one click away. 

Just be aware, if you use a different G/L code for the prepayment your Aging will not balance to your A/R G/L account balance.

Correct not directly, but you can still add the two accounts together and it will. 

So are you saying that I can receive prepayment/deposits from customers and instead of putting in the 1100 ar account I can put all deposits-prepayments in a separate account such as 1101 customer  deposits? And ar account 1100 would only be in used to show what customers owe us or have been invoiced?

When invoicing the customer how would I get the prepayment to then go against an invoice if I have it go in 1101 g/l account? 
the invoice would hit 1100 and the deposit would be in 1101? 

We created an inventory item that hits the deposit liability account instead of sales.  We add it to our sales orders twice (+ and - ) one to invoice the deposit, the other to credit the invoice upon shipment. We invoice the deposit only: AR/Deposits.  Book the receipt to Cash/AR. Then when we ship, we bill the credit - producing a zero invoice:  Deposits/Sales   Works for us.  Only imperfection is that the liability is recorded before the actual cash is booked...other than that, it gives us an invoice to bill the deposit, and it's all tied to the same sales order.