If it is purchase with VAT, prepayment should include VAT and it should go to unrealized VAT account when posting prepayment invoice. If it is purchase without VAT, prepayment should not include any VAT.

Is there VAT on advance payment?

Upon payment of the client of advances and deposits with the Firm, the client shall record the same as professional fees expense based on the official receipt that the Firm will issue. ... If the Firm is a VAT-registered, then, the VAT-registered client will be passed on VAT on such advances.

How do you account for prepayments?

Accounting for Prepayments

From the perspective of the buyer, a prepayment is recorded as a debit to the prepaid expenses account and a credit to the cash account. When the prepaid item is eventually consumed, a relevant expense account is debited and the prepaid expenses account is credited.