Sometimes in business, you may receive a payment in advance from a customer, or you may have to pay an advance to your vendors before you place an order. As soon as you receive the payment in the bank, create a bank statement and reconcile it,as it is a payment in advance from the customer; don’t select the counterpart at reconciliation.
After issuing invoices to customers, you can match this prepayment with invoices through Manual payment and invoice matching tab in Accounting module.
You can also use this function in case you process payments via Payments in Sales/Purchases tab.
After reconciliation, system will generate matching numbers for reconciled transactions, which help you keep tracks of all receivable and payable transactions with payments.