China order deposits in year-end accounts
For accruals accounts, normally record a deposit for goods not yet acquired as a supplier advance, rather than an immediate expense. Ask your accountant to assess any goods already acquired and the unpaid balance separately, using the contract and dated evidence. Cambridge China Bridge can help gather factory evidence.
Start with the accounting basis
This guide is a practical bookkeeping approach for accruals accounts. Confirm your accounting basis with your accountant before posting the year-end adjustment. HMRC says cash-basis users do not need the prepayment and accrual adjustments described in its self-employment guidance.
For an advance towards goods you have not yet acquired, the usual starting entry is a debit to supplier advances or prepayments and a credit to bank. Give the entry an order reference. Ask your accountant to check the classification, especially where the payment covers tooling, development or services as well as goods.
Separate the advance, stock and balance owed
Use separate columns in your year-end order schedule for payments made, goods acquired and amounts still owed. An unfinished order can contain different categories: some goods may have been acquired while the remaining payment still relates to future production. Do not classify the whole order from its overall completion status.
Where your accountant confirms stock recognition, apply the related advance against that purchase and record any recognised unpaid liability separately. Avoid leaving the same payment in both stock and prepayments. Use valuing unsold imported stock for valuation and unpaid factory invoices for the separate currency question.
Build evidence of acquisition at year end
Collect the signed order, amendments, ownership and acceptance terms, dated production reports, batch lists, inspection reports, warehouse confirmations and shipping documents. Ask the factory to identify which goods existed at year end, their location and whether they were allocated to your order. Photos help establish progress but do not settle ownership.
Ask your accountant to assess the contract alongside the evidence of control, risks and delivery. Do not use payment, an inspection pass or a shipping date as the sole trigger. Goods at a factory or in transit need specific assessment. For purchases from a UK seller, see ownership and transit risk.
Reconcile invoices without double counting
Match each payment to the order and reconcile it with the supplier's statement. Label proforma requests, deposit receipts and final invoices distinctly. A document headed invoice does not by itself answer whether you have acquired goods or incurred a liability. Ask the supplier to explain disputed balances and payments not yet credited.
Give your accountant the goods evidence even if the final invoice has not arrived, so they can assess an accrual. Conversely, flag invoices raised before production or delivery rather than automatically treating them as stock. Record later delivery evidence separately, noting what it confirms about the position at year end.
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Hand over an order-by-order close pack
Prepare a schedule showing supplier, order reference, currency, payments, production status, location, relevant contract terms, invoices and proposed classification. Attach the evidence and record the accountant's decision. Keep unresolved ownership questions visible rather than filling the gaps with assumptions.
If delivery or recovery looks doubtful, flag this for a recoverability review rather than carrying the advance forward without discussion. Follow supplier stopped replying and kept your deposit for recovery steps. Cambridge China Bridge's staff in China can gather production and storage evidence for your accountant to assess.
Frequently asked questions
Is my China supplier deposit a year-end expense?
In accruals accounts, an advance for goods not yet acquired is normally kept as a supplier advance or prepayment. Ask your accountant to check what the payment covers before expensing it.
Can goods still in China be year-end stock?
They may be. Give your accountant the contract, batch identification, storage confirmation and evidence of control and risks. Location alone does not settle the classification.
Does a final invoice turn my deposit into stock?
Do not use the invoice alone. Reconcile the advance, establish what goods were acquired at year end and ask your accountant to assess the unpaid liability separately.
What if the factory cannot finish my order?
Flag the advance for a recoverability review. Keep the payment trail, factory updates and recovery correspondence, and discuss any proposed write-down with your accountant.