Prepayments redux

[John Bell <..hidden..>]

I have read January's thread on the subject and would like to add my
comments...

In the UK, (at least) an invoice is REQUIRED for a prepayment as it
raises a liability for VAT.

On other systems, in the past, we have simply raised an invoice for
the value of the prepayment of the  sale price and posted it as a
sale. I agree with Chris, that this is not correct.

For a sale of goods scenario (like mine), one way is to:
1) Issue an invoice for a service "prepayments" that goes to a ledger
account "unearned income received"

2) at the time of shipping:
a) Issue an invoice for the full amount for the goods sold
b) Issue a credit for the prepaymet

This has the advantage that, for export purposes, the invoice
correctly covers 100% of the value of the goods.

Some people may not like to send 2b to the client, in which case there
is a variation:
3a) Issue an invoice for the prepayment value for the goods sold
b) Issue an invoice for the balance (if any)
c) Issue a credit for the prepayment value for the prepayment service.

Only 3b needs to be sent to the client. 3a and 3c are kept on file as
they cancel each other.

In a service scenario, or where a client orders a subscription of 12
montly newsletters, then 3a and 3c are could be issued monthly.

Regards

John Bell