A client has several suppliers they purchase their materials from, and most of the suppliers require part or all payments to be made at the time of order. You advise your client to set up a Prepayments account that can be reconciled each month. How should this account be set up?

• Set up and other current asset account called prepayments
• Set up a Service item called Prepayments
• Set up a Long Term Liability account called Prepayments
• Set up a Cost of Goods Sold account called prepayments