What is the reasoning behind having both "deposit" or "payment on account"?   This confuses me everytime and  i do not know which one to choose.  
When a customer has overpaid I get the message " Is this a deposit?  (if not it will be treated as payment on account)

 
I know that choice I makes causes statements to print differently  and AR-R to print differently.   Choosing "payment on account" will result in the money paid being reflected in both AR-R and statements.  But if i choose "deposit" I am not sure what happens to it.      
What are examples of times I am supposed to use "deposit"  or "payment on account"  
 
Thank you for any insight! !
 
from the help file:  The dollar amount outstanding for any open deposits for this customer. Deposits are kept in  separate GL account (as specified in AD-A General Ledger Defaults) until applied to  invoices through AR-C Record Payments or automatically applied when posting invoices if  they have been attached to a sales order using AR-N Enter/Print Sales Order Deposits.
 
from google; The difference is that a payment doesn't hit the GL until the invoice is posted whereas a deposit hits the GL as soon as the deposit is saved.  
It follows the accounting principle; the deposit is a current liability that is debited and sales revenue credited. A customer deposit could also be the amount of money deposited in a bank. Since there are no cash earnings, the money is debit to the bank and credit to the customer's deposit account