Customer statements and prepayments
How prepayments you receive appear on your customer’s statement.
Prepayments don't display on an outstanding type customer statement. Prepayments do appear on an activity type statement, but they're not deducted from the total balance on the statement. This is because Xero doesn't account for a prepayment in your Accounts Receivable until it's applied to an invoice.
You can apply prepayments to an invoice up to the invoice’s total amount. Applying a prepayment will add an allocation item to the statement that will impact the balance due.
Alternatively, treat your prepayment as an overpayment in Xero. Xero includes overpayments in the total balance on your customer's activity statement.