Payment on account definition
/What is Payment on Account?
A payment on account occurs when a payment is received from a customer, and there is no notation with the payment regarding which invoice is being paid. A payment on account can also refer to an advance payment, which the recipient then applies to subsequent invoices as they are generated.
Accounting for a Payment on Account
The seller records the payment in a pending account, while depositing the check and maintaining all information received about the payment in a file. The contents of the pending account are later investigated and cleared as more information is obtained from customers. The accounting department of the recipient needs to investigate these payments on a regular basis, or else the status of its detailed invoice records will become increasingly inaccurate over time.