Within this post I want to introduce you another alternative approach for recording vendor prepayments in Dynamics AX. This approach differs from the ones introduced in the earlier posts by the fact that no prepayment invoice is recorded initially but that the process starts directly with the payment of the prepayment amount requested by the vendor.
In order to make this approach work, I setup the following new vendor posting profile (“PRE2”).
What you can identify from this newly setup posting profile is that the prepayment balance sheet account (“132200”) is entered in the summary account and sales tax prepayment section.
Step 1: Setup purchase order
As mentioned initially, the alternative prepayment process illustrated here does not require entering a prepayment invoice and thus starts with the setup of an ordinary purchase order and the payment of the prepayment amount to the vendor.
Step 2: Pay prepayment amount to vendor
The payment of the prepayment amount to the vendor does not differ from the payments shown in the earlier posts …
…except that the newly setup posting profile is used when the prepayment journal voucher check box is activated.
The outcome of this payment transaction is the following voucher that debits the prepayment balance sheet account no. 132200 with a total amount of 5000 EUR (5950 EUR – 950 EUR).
What you can also identify from the voucher is that only the ordinary (deductible) VAT account is used, which allows deducting this amount directly.
Step 3: Post final vendor invoice
The third and final step requires that you select the prepayment made in the open transaction form of your purchase order.
Please note that Dynamics AX indicates that the payment marked for settlement is a prepayment.
Once the open transaction is marked for settlement, the final vendor invoice can be posted.
After posting the final vendor invoice, the following vouchers result:
The first voucher shown in the upper part of the screen-print records the final vendor invoice and posts a total VAT amount of 4370 EUR. This amount is offset by the related voucher created that offsets 950 EUR VAT.
As before, the following illustration summarizes all transactions posted during the prepayment process illustrated.
What you can identify from the posting summary is that no temporary (non-deductible) VAT account is recorded. Instead, all VAT transactions are recorded directly on the ordinary (deductible) VAT account no. 130800. For that reason, also this approach ensures that the VAT is posted and deducted at the right time.
A major advantages of the prepayment approach demonstrated in this post is its comparative lower complexity and its conciseness.
Those advantages do, however, come at the price of several disadvantages. The first disadvantage is that you need to generate an internal document for accounting & auditing purposes to document the prepayment made to the vendor. The second disadvantage with this approach is that you cannot directly identify the prepayments that get deducted when posting the final vendor invoice. As a result, marking all prepayment(s) made for settlement with the final vendor invoice needs to be done with utmost care.