What is the accounting entries when we receive Down payment , and when we pay Advance payment ?

A down payment received before it is earned is recorded with a debit to the current asset account Cash and a credit to the current liability account Customer Deposits. When the contract is completed, the account Customer Deposits will be debited for the amount of the down payment, the sale will be recorded with a credit, and Cash or Accounts Receivable will be debited.

hi,

there are 2 sections to your question

1. Customer Down Payment - i.e amount received in advance from your customer

(Usually based on proforma invoice)

Entry to be posted

Dr Bank

Cr Customer Advances A/c (Balance Sheet - Liabilities)

Once you have provided the necessary goods or service to the customer, you will issue a final invoice to the customer and accordingly move the entry from the advance to the Customer a/c

2.Vendor Down payment - i.e amount paid in advance to your supplier

Entry to be posted

Dr. Vendor Down Payment A/c (Balance Sheet - Asset)

Cr. Bank

Once you have received the necessary goods or service from the supplier, you will need a final invoice from the vendor and accordingly move the entry from the advance to the Vendor a/c

Debit the cash

Credit the Customer account

(for down payment received)

Debit receiver (Advance Payment A/c)

Credit the Cash account

(for advance payment)

Two journal entries are involved when we pay in advance on the point of view. They are:

1. Initial recordation. Debit the cash account and credit the customer advances (liability) account.
2. Revenue recognition. Debit the customer advances (liability) account and credit the revenue account.