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Is this a prepayment or not?

Tomas Kavaliauskas's Profile

Good day,

I have a website, where users can deposit money to their virtual accounts and then buy services from my website by using that virtual currency. My question would be, is that deposit to virtual account is a prepayment? I mean, the real service is the one that users buy by using that virtual currency, not the actual deposit, so I instantly thought that it must be a prepayment, but the problem is, that prepayment invoice requires order no, of the invoice that they are prepaying to. So I do not have anything to put in there, because service invoice does not exist yet, it will be created only after user buys something.
If user deposits 100 USD to their account they can buy multiple services, so it seems that something is wrong in here with my accounting system. I have no accountant that can help me, so I would really appreciate any help.
Main question would be: is it correct to take this deposit to their virtual account as a prepayment?

Thank you.


Victor Shah
Title: Account Manager
Company: FlowRocket, LLC
(Account Manager, FlowRocket, LLC) |

Hi Tomas,

Interpreting your question, when the customer is making a deposit to buy virtual currency, are they eligible for any refund of money that is not being used/utilized?

In one case, the deposit you receive is your deferred revenue for future and if they are eligible for refund, that is your deposit liability.

I would not take it as a pre payment or deferred revenue as your are not sure what type of service the customer will buy and when! So what i would account is,

when you receive the deposit,
Bank A/c Debit
Customer Deposit A/c Credit (Create a customer deposit)

When they buy a service,

Customer Deposit A/c Debit
Income A/c Credit

This way you will also have an idea how much is the customer deposit lying with you not being utilized.

Let me know if this helps!


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