Paying a deposit to vendor

[Donna Jo]

I paid a $50 deposit to a vendor when I first signed up with his service. All upcoming bills have been applied to this deposit. In January, my montly bill with this vendor was $24.19. In February, my monthly bill was $30.86.
How do I record the initial deposit? Also, how do I record the monthly bills from this vendor to show that these expenses are applied toward the $50 deposit?

[LJR]

This is what I would do:

1. Setup a current Asset Account Prepaid Expenses

2. Write a cheque for the $50.00 deposit (CR Bank account;DR Prepaid expenses)

3. When you receive your january bill, go to vendors and enter the bill. Net amount will be 0 (DR your appropriate expense account by 24.19; CR prepaid Expenses by 24.19)

4. When you receive your Feb bill, go to vendors and enter the bill net amount will be 5.05 (DR your expense account 30.86; CR Prepaid expenses by 25.81 (have used up the $50 deposit) and system will create the 5.05 CR to your accounts payable account.

5. Go to vendors to Pay Bill - should indicate you owe 5.05 - create cheque.

6 Following months just enter your bill & pay bill normally.

Hope this helps
LJR