Payment on Account - What is Payment on Account?
Definition: Payment on Account is any partial payment of an amount that is owed, either to you or by you, that is not matched to a specific invoice.
If you receive a payment from a customer or send a payment to a supplier without making reference to a specific invoice this can be treated as a payment on account.
If you make a payment to a supplier that you cannot allocate at the time to invoices received, you can designate this as a "payment on account". Then at a later date you can fully match it with the invoice/invoices it relates to, or partially match it against an invoice.
Payments made by your customers to you can be treated in the same way.