#Xero invoicing accounting full#
#Xero invoicing accounting code#

Overpayments are ideally suited for recording those times when your customer pays you twice, and you will hold the funds to be applied against a future (and unknown) invoice. Then apply the Prepayment credit against the total invoice.

#Xero invoicing accounting full#

When you invoice for the job you should ALWAYS invoice for the full amount (as if the deposit hasn’t been paid) and charge the full sales tax. If sales tax needs to be reported on this transaction then you should ensure that you use the correct tax rate (if you do this regularly then you may want to change the default tax rate for the Prepayments account so you don’t forget to change it each time).

#Xero invoicing accounting code#

If you do not want it to show as income then you should code it to a Prepayments (Balance Sheet) account. If you enter a P&L code here (such as sales) it will show up as revenue in that month (and then get reversed out when the final invoice is issued. When using a Prepayment you need to specify a ledger code. If you were to post funds received before an invoice has been raised as an overpayment, the balance paid would sit as a credit to the sales/purchase ledger until an invoice is available to allocate it to, therefore not accounting for sales/purchase tax, this is explained in more detail below. The prepayment function in Xero is specifically designed to manage the sales/purchase tax implications of receiving funds or making payments, particularly on the cash accounting scheme where the tax point is the date payment is received or made. You access these from the Spend/Receive Money entry screens from the Manage Account menu, or simply by adding detail when creating a transaction from the bank reconciliation screen, with the default set as “Direct Payment”. These transaction types allow you to record money received from a customer (or paid to a supplier) BEFORE an invoice has either been issued or received. These transaction types are actually variations of the standard Spend/Receive Money bank transactions but they have very unique treatments. These are “Prepayment”, “Overpayment” and “Split Payment”.

Xero has multiple ways of recording transactions that many users aren’t aware of.