Scenario: Craig just landed a contract to build a football field for the new high school. Because it is so large, he has hired Excavation Excellence to prepare the field before his landscapers can get to work. The estimate from Excavation Excellence is $120,000, and they require a 30% deposit to secure the contract. Craig doesn't use prepayments often, and he doesn't anticipate that it will become a regular part of his business.
You will use the Accounts Payable method to record this prepayment.