How to Use a Prepayment Liability Account for Customer Deposits:

Create a Prepayment Liability Account (if it doesn't exist):

1. Go to Chart of Accounts.
2. Click 'Add Account'.
3. Choose Account Type: Liability.
4. Name it something like Customer Prepayments or Deposits Received.
5. Click 'Save' to save the account.

Record the Customer's Deposit via Journal Entry:

1. Go to Accountant > Journal Entries, then click 'New Entry'.
2. In the description, write Customer Deposit / Prepayment.
3. Credit the Customer Prepayments liability account with the amount received.
4. Debit your Bank Account with the same amount.
5. Save the entry.

Apply the Prepayment When the Invoice Is Paid:

1. When you invoice the customer later, and it's time to apply the deposit:
2. Create a new journal entry.
3. Debit the Customer Prepayments liability account.
4. Credit your Accounts Receivable or the invoice amount (to match the payment).
5. This reduces the liability and applies the deposit to the invoice.