The intent is that the financial reports will show the payments made in advance of the receipt of goods from suppliers – as an ‘asset’ that the business has.
The processes used will mean that Payments in Advance are NOT carried as a credit in the Supplier accounts; this distorts the Supplier Aged Trial Balance report. Instead, all of the Payments in Advance value is to be stored in the General Ledger (GL) in the Balance Sheet section of the Financials.
The recommended process is to set up a GL code for Payments in Advance.
Create the purchase order and send to the Supplier
When paying the deposit, do a cashbook payment to the Payments in Advance GL Code
Repeat this process if a second payment is required prior to the goods being received.
Receipt the products in on delivery
On the Supplier Receive products, receipt the products at the NZ Dollar rate (most people have a spreadsheet to work the true cost including shipping for products)
A negative line to the GL code for Payments in Advance for the total paid already
A further GL code for Foreign Currency Fluctuations is added for the difference.
The balance of the invoice is paid as usual.