Welcome to our community! You've asked a great question here, as sometimes customers do overpay and you always want your accounting statements to be accurate and the books to balance at the end of the day. Your choices may vary depending upon whether you know that customer to be a repeat customer, and your software options. The simple solution is to apply the full payment to that invoice, which will create a credit note for your customer to be applied to their next purchase. You can then reconcile the next invoice by applying the credit to it at that time.
If you could tell us which accounting software you use, we're sure our great members would have some additional advice that may help you.
I am using Fund EZ. It's for Non-For-profits. I am not sure if it makes automatic credits.
Fund EZ should create an automatic credit for any over-payments -- if it does not, I highly recommend another accounting software.
As to how to handle an over-payment,
1) If it generates a credit for you -- simply leave it until the next time the client pays. If a refund is issued, take it out of the same account (normally Account Receivables) when you issue the refund check
2) If it does not generate an automatic credit for you, then you will need to make a journal entry showing a credit balance. That is done with the following journal entry:
Account Rec. XXX
If you need to issue a refund -- simply make another journal entry the reverse of this one.
You never create another invoice for an over-payment as you will slowly cause outliers to appear in your financials and if you were to lose the client -- it becomes extremely difficult to calculate "prepaid" items. It also violates the "Matching Principle" in accounting and that is a big problem down the line.
As for having to create or track it on another account. That shouldn't be needed. The Account Receivable is already tracking balance and credit according to customers -- no need to make it any harder.
I hope this helps. Let me know if you have any other questions or run into a snag with the journal entry.