Overview
A prepayment is when a customer pays for goods or services in advance, before they are delivered or consumed. On the revenue side, this advance payment is referred to as prepaid income.
What is prepaid income?
Prepaid income, also known as unearned income, is income for which payment has been received from a customer, but the related goods or services have not yet been delivered. Because the company still owes the customer the goods or services, the advance payment is recorded as a liability on the balance sheet, not as revenue. As the goods are delivered or the services are rendered, the liability decreases, and the corresponding revenue is recognized on the income statement.
Example: A magazine publisher receives payment for a one-year subscription upfront. The full amount is initially recorded as unearned revenue (a liability). Each month, as an issue is delivered, a portion of that amount is recognized as revenue.
Note: Prepaid income is recorded from the Invoices section.
Steps to Create a Prepaid Income
Step 1: Navigate to Invoices
From the top navigation bar, click More.
From the dropdown, hover over Revenue, then select Invoices.
On the Invoices page, click Create Invoices, then select Create manually from the dropdown.
A Create Invoice form opens for you to enter the details.
Document details
Title: the title of the invoice.
Document number: the invoice reference number.
Currency: the invoice currency, selected from the dropdown.
Date: the invoice date.
Customer: the customer the invoice is issued to, selected from the dropdown.
Due date: the date payment is due.
Record this as a prepayment
Select the Record this as a prepayment checkbox to reveal two additional fields:
Spreading over (months): the number of months over which the prepaid income will be spread.
Prepaid account: choose the prepaid account (e.g., Unearned Income) from the dropdown list.
Line items
Line items list the products or services being billed to the customer.
Item name: name of the item or service.
Item quantity: quantity of the item being sold.
Account: the revenue account the item amount flows into (e.g., Sales Revenue, Service Revenue).
Amount: the price of the item.
Tax: applicable tax on the item.
Discount: entered as a fixed amount or a percentage.
Actions: the + button adds another line item; the – button removes one. Multiple items can be added to a single invoice, each with its own account, tax, and discount.
Note: Subtotal, discount, tax, and total amounts are calculated automatically based on the line items entered.
Additional details
Add shipping information: include shipping details for the invoice, where applicable.
Add payment information: record a deposit or part-payment already received, including the deposit amount and the payment account (cash, petty cash, or bank).
Split account: allocate a percentage of the invoice to another account, such as an expense account.
Classification
Branch: the branch associated with the invoice.
Employee: the employee associated with the invoice.
Department: the department associated with the invoice.
Project: the project associated with the invoice.
Memo and attachments
Internal memo: notes for internal reference only, not visible to the customer.
Note on document: information that appears on the invoice itself, such as payment instructions or account details for the customer.
Attachments: a file added to the invoice for future reference.
Step 3: Save and review
Click Save as and select one of the following:
Draft: saves the invoice without posting it to the general ledger.
Publish: saves the invoice and posts it to the general ledger.
Note: Regardless of the option selected, the prepayment appears in the Invoice Table once saved.
Each entry on the table includes:
Date
Invoice No
Customer
Title
Total Amount
Status
Balance
Payment Terms
Due Date
Projects
Prepaid: shows Yes or No, depending on whether the invoice is a prepayment.
Prepaid months: the number of months the prepaid income is spread over.
Managing Prepaid Income with Individual and Bulk Actions
Use the Search Bar or scroll through the list to locate the specific invoice/prepayment you want to update.
All the fields on the table are editable. Click on any field (e.g., Title, Customer, Due Date) to make changes to the record.
Steps to Record Invoice Items:
To view, manage, or edit the items associated with an invoice/prepayment, use either of the following methods:
Menu edit: Click the three-dot icon at the start of the invoice row, then select Edit from the menu.
Inline edit: In the Invoice Table, click directly on a field, such as the Total Amount cell or the Balance cell, to open it for editing. Each field on the table is editable, and clicking it opens the relevant details for updating, including the account.
Click on the Total Amount of the invoice you want to edit.
A modal window will open, displaying the line items recorded under that invoice.
Inside the modal, you can:
Edit line items by clicking on any field (e.g., Item Name, Quantity, Account, Amount, Tax, Discount)
Add a new line item by clicking the ➕ icon in the action column to insert a new row
Delete a line item by clicking the ➖ icon in the action column to remove a row
As you make changes, the Total Amount updates automatically in real-time.
When you're finished, click “Save” at the bottom of the modal to apply your changes. The itemized details and total invoice amount will update immediately.
On the Invoice table, each entry has a menu (three dots) that allows individual actions and checkboxes for bulk actions.
Individual Actions (3-Dot Menu):
Open: View the prepaid income to view a summary of the details.
Edit: Make changes to the prepaid income.
Manage payment: Record or manage payments associated with the prepaid income.
Duplicate: Create a copy of the prepaid income.
If the status of the original prepaid income is Paid, Unpaid, or Partially Paid the duplicate will have a Draft status allowing you to edit and save it as needed.
Delete: Remove the prepaid if it’s no longer needed.
Revert to draft
Manage Items