What does it mean that a prepayment is credited

The prepayment is on the credit side, indicating that the other party owes money.

Prepayments are asset-class accounts, with positive debit balances and negative credit balances. Of course, when we understand in accounting, we can't simply understand it in terms of positive and negative.

The advance payment means that the money is actually yours, and you want to buy the goods, but the Lord asks you to pay the money first, and you pay the money to the other party first, and then debit the money you have paid. After the other party delivers the goods and issues a VAT invoice, you can credit the prepaid account with the face value, which means that the things you want to buy have arrived, and no one owes anyone. Of course, there are two situations here, one is that the face value of the other party is greater than the amount you prepaid, of course, the balance is on the credit side after the account is entered, and the money you prepaid is not enough, and you have to pay others.

The second is that the face value of the other party is less than the amount you prepaid, and the balance is on the debit side after the account is entered, and you have paid more in advance, and the money can be returned to the other party, or offset the next payment.

For the understanding of account credit balance, it is necessary to first find out whether the debit square is the positive number or the credit square of the account such as assets and liabilities. Then according to the actual accounting of the account to understand, rote memorization is useless, with daily logic to understand, it is not easy to forget.

What does the prepaid account debit mean.

The prepaid account closing credit balance represents "accounts payable".

When the amount prepaid by the enterprise is less than the actual amount of the purchased goods and has not been paid, the debit amount is less than the credit amount, and the credit balance will appear, which means that the enterprise owes the first party the payment, that is, "accounts payable". In this case, the nature of the "prepaid" account essentially reflects a liability of the enterprise.

The enterprise should set up the "prepaid" accounting account to account for the amount advanced by the enterprise to the ** unit in accordance with the provisions of the purchase contract

1) The prepayment made by the enterprise for the purchase of goods shall be debited to the "prepaid accounts" account and credited to the "bank deposit" account.

2) When receiving the purchased materials, according to the invoice bill, etc., the amount that should be included in the cost of purchased materials shall be debited to the accounts of "material procurement" or "raw materials" and "inventory goods", and the "tax payable - VAT payable (input tax)" account shall be debited according to the VAT amount indicated on the special invoice, and the "prepaid accounts" account shall be credited according to the amount payable.

3) The amount of the supplementary payment shall be debited to the "Accounts in Advance" account and credited to the "Bank Deposit" account.

The balance of the prepaid account is normally on the debit side. The balance becomes accounts payable on the credit side. The reason for this is that the amount of the purchase price or labor fee is greater than the amount of the advance payment, so the balance becomes a credit.

At this point, you can carry forward the prepaid credit balance to accounts payable.

The prepaid account is initially the "debit" amount (the "debit" balance), and when the actual purchase is greater than the prepaid amount after the actual purchase is made, the balance of the prepaid account becomes the "credit" balance. For example, we prepaid 100 yuan for company A.

Debit: Advance Accounts - Company A 100

Credit: Bank deposit 100

We purchased 150 yuan from Company A.

Borrow: Inventory goods - 150

Credit: 150 in advance

In this way, the account balance of the prepaid account - Company A becomes a credit of $50. Do you understand?

The accounts payable debit side indicates a decrease in "accounts payable", which is generally indicated on the debit side at the time of payment;

The accounts payable credit indicates an increase in "accounts payable", which is generally indicated on the credit side when the amount is owed;

The debit side of the prepaid account indicates the decrease of the "prepaid account", which is generally expressed on the debit side when the advance is made;

The credit side of the prepaid account indicates an increase in the "prepaid account", which is generally expressed on the credit side when the amount is owed;

Hope it helps!

The prepaid account closing credit balance represents "accounts payable".

When the amount prepaid by the enterprise is less than the actual amount of the purchased goods and has not been paid, the debit amount is less than the credit amount, and the credit balance will appear, which means that the enterprise owes the first party the payment, that is, "accounts payable". In this case, the nature of the "prepaid" account essentially reflects a liability of the enterprise.

The enterprise should set up the "prepaid" accounting account to account for the amount advanced by the enterprise to the ** unit in accordance with the provisions of the purchase contract

1) The prepayment made by the enterprise for the purchase of goods shall be debited to the "prepaid accounts" account and credited to the "bank deposit" account.

2) When receiving the purchased materials, according to the invoice bill, etc., the amount that should be included in the cost of purchased materials shall be debited to the accounts of "material procurement" or "raw materials" and "inventory goods", and the "tax payable - VAT payable (input tax)" account shall be debited according to the VAT amount indicated on the special invoice, and the "prepaid accounts" account shall be credited according to the amount payable.

3) The amount of the supplementary payment shall be debited to the "Accounts in Advance" account and credited to the "Bank Deposit" account.

The prepaid accounts of the enterprise are the assets of the enterprise, which belong to the asset class account, the debit statement increases, the credit statement decreases, and the general ending balance is on the debit side. The credit balance should indicate that the prepaid account is not enough for the restocking charge. and the amount that needs to be paid after the prepayment has been deducted.

The enterprise pays the supplier in advance, but has not yet called Shilu to confirm the expenditure, or the enterprise enjoys control, and for the purchasing unit, during this period of time, the formation of a receivable claim against the supplier, but the way to recover the claim is not to recover monetary funds, but to recover the goods, and the claim belongs to the asset.

The credit of the prepaid account means that the payment for the goods advanced by the unit to others, and the others owe them the goods.

Interpretation of prepaid accounts:

Prepaid accounts refer to the payment of the first unit of the enterprise in accordance with the provisions of the purchase contract. In daily accounting, the prepaid accounts are recorded according to the actual amount paid, such as the prepaid materials, the payment for the purchase of commodities, and the pre-purchase deposit for agricultural and sideline products that must be issued in advance and recovered later. For purchasing companies, prepaid accounts are a current asset.

Prepaid accounts generally include prepaid payment and prepaid purchase deposit. The prepaid accounts of Shifan Qinggong Enterprise mainly include prepaid project payments, prepaid material payments, etc.

Accounting treatment: 1) The prepayment made by the enterprise due to the purchase of goods shall be debited to the "prepaid accounts" account and credited to the "bank deposit" account.

2) When receiving the purchased materials, according to the invoice bill, etc., the amount that should be included in the cost of purchased materials shall be debited to the accounts of "material procurement" or "raw materials" and "inventory goods", and the "tax payable - VAT payable (input tax)" account shall be debited according to the VAT amount indicated on the special invoice, and the "prepaid accounts" account shall be credited according to the amount payable.

Attention to prepaid accounts:

1. Prevent the use of prepaid accounts as a "transit station".

According to the regulations, the advance payment business of the enterprise must be based on the effective and legal ** contract or car trembling, and in practice, the advance payment business of some enterprises has no corresponding contract at all, but uses the "transfer station" of the advance payment to build a bridge to and fro, illegally settle for others, and take the rebate or commission as already owned; or use the business to transfer funds, conceal income, set up a "small treasury" or divide it privately.

2. Prevent the use of pre-receivables as a "** station".

In many enterprises, the "prepaid" account plays the role of "** station", the enterprise sells goods, does not recognize the income, but temporarily stored in the "prepaid" account, as an advance receipt, in the future, and then make the opposite accounting entries, as a refund. The consequence of this is that companies can evade income, evade taxes, and hide income.

3. The direct payment that should be credited to income is credited to the advance receivables

The accounting system stipulates that revenue is recognized after payment for goods is received and the invoice bill and bill of lading are handed over to the buyer. During the inspection, the enterprise should be required to issue a corresponding contract for the credit amount of each advance receivable sub-account to verify the reason for the occurrence of the advance receivable.

Combined with the delivery business of the enterprise when the advance accounts are received, check the inventory commodity ledger or bill of lading, verify whether the enterprise has the payment and delivery sales business, and whether the items that should be recognized as income are treated as advance accounts receivable.