Advance Payment - Accounting Discipline


The best way to record an advance payment to a supplier / customer is that it is recorded in a separate ledger (e.g. Advance to Suppliers) and not in the regular payable ledger (e.g. Trade Payables). The reason for this is that Notes to the financial statements need to separately show advances to suppliers. These should not be net-off.

Now, the issue is that ERPNext only allows to use Trade Payable ledger for recording advance payment. If any other ledger account is used (I tried with both Payment Entry and Journal Entry), then the advance is not pulled in the Purchase Invoice.

In my humble opinion this issue needs to be urgently addressed as it is hampering the reporting.



Have you checked the option set advances and allocate (FIFO) in your purchase invoice.

Best Regards

You can set up a separate ledger for advances.

However, the question is that how you’d want this to reflect on your reports? Since the system applies the filter for only type Payable Accounts.

I have setup a seperate ledger; thats not an issue at all. In order to meet system requirements i had choosen account type as payable. Payment is booked in this account.

But issue is that when you call advance payments in subsequent purchase invoices; payments recorded in this ledger do not show up. Only advance payments booked in trade payables ledger show up in purchase invoice.

As for report, in a trial balance this ledger would separately appear. Similarly on balance sheet this ledger would separate appear like all other ledgers. As i mentioned earlier financial statements prepared under accounting standards require advances to suppliers/customers to appear separately and not net off from trade payable/ receivable. This requirement is easily met by using a seperate ledger. No issues here.

The problem arises when advances booked in this separate ledger (other than trade payable/receivable standard ledger) are not pulled in the purchase / sales invoice.

1 Like

@Ranbir Yes. It doesn’t solve the issue.

tested, the party_account filter condition in erpnext.controllers.accounts_controller.get_advance_payment_entries method can be / need to be removed as below

def get_advance_payment_entries(party_type, party, party_account, order_doctype,
		order_list=None, include_unallocated=True, against_all_orders=False, limit=None):
	party_account_field = "paid_from" if party_type == "Customer" else "paid_to"
	currency_field = "paid_from_account_currency" if party_type == "Customer" else "paid_to_account_currency"
	payment_type = "Receive" if party_type == "Customer" else "Pay"
	payment_entries_against_order, unallocated_payment_entries = [], []
	limit_cond = "limit %s" % limit if limit else ""

	if order_list or against_all_orders:
		if order_list:
			reference_condition = " and t2.reference_name in ({0})" \
				.format(', '.join(['%s'] * len(order_list)))
			reference_condition = ""
			order_list = []

		payment_entries_against_order = frappe.db.sql("""
				"Payment Entry" as reference_type, as reference_name,
				t1.remarks, t2.allocated_amount as amount, as reference_row,
				t2.reference_name as against_order, t1.posting_date,
				t1.{0} as currency
			from `tabPayment Entry` t1, `tabPayment Entry Reference` t2
			where = t2.parent and t1.payment_type = %s
				and t1.party_type = %s and = %s and t1.docstatus = 1
				and t2.reference_doctype = %s {1}
			order by t1.posting_date {2}
		""".format(currency_field,  reference_condition, limit_cond),
													  [payment_type, party_type, party,
													   order_doctype] + order_list, as_dict=1)

	if include_unallocated:
		unallocated_payment_entries = frappe.db.sql("""
				select "Payment Entry" as reference_type, name as reference_name,
				remarks, unallocated_amount as amount
				from `tabPayment Entry`
					{0} = %s and party_type = %s and party = %s and payment_type = %s
					and docstatus = 1 and unallocated_amount > 0
				order by posting_date {1}
			""".format(party_account_field, limit_cond), (party_account, party_type, party, payment_type), as_dict=1)

	return list(payment_entries_against_order) + list(unallocated_payment_entries)

Thanks @szufisher - the red highlighted needs to be deleted? Could you tell which file it is and path?

@admin Perhaps someone from admins could fix this in next release.

Any fix for this issue?

I haven’t found any yet.

This issue has been annoying me a lot. The only proper way is to have a section in the party doctype i.e. suppliers/customers and the user should be able to choose

“Advance Payable Accounts” or “Advance Receivable Accounts” .

This is definitely an issue for me too. The same principle applies in IOLTA trust accounts. In essence you are holding someone else’s money on “trust” i.e. the customer may decide to cancel a part of the order and the deposit needs to be paid back or a second project is started and there are various reasons why the prepayment should be held in a liability account versus an asset account and a separate ledger, or journal as some systems call these separate ledgers. I saw for example an accounting implementation on Odoo at Law & Legal Practice Management App | Odoo Apps Store. In prder ti implement I think that an additional journal debit and credit entry should be made on advance payments. In essence a liability group account should be created initially in the chart of accounts. And then, per customer or per project liability accounts under this group account. Once the prepayment is allocated to a sales or purchase invoice the liability account should be decreased or increased on the submission of the invoice.

What is the goal of this? To allow selection of advance in Invoice, to separate the ledger in the report, or other?

My clients also ask why the payable is higher and why there is no advance in the financial report.

1 Like

Maybe someone can tag one of the developers team members to look at it

This is an issue for my client’s businesses as well, where advances have to be separately reported, and also where the creation of advances should not be posted to a payables type of account.

But the irony now is that if you don’t tag the advance payment account as a payables account, you will never be able to select it to associate it with the purchase invoice. It has been deeply frustrating as well when we are trying to find a solution around this. I would say it is fairly common as well.

From a statutory point of view, the account that records the advance payments that are made to a supplier should be recorded and stipulated as an asset account, not a payables account.

Please check this feature in version-15 Advance In Separate Party Account