A prepayment schedule is used to schedule the posting of income or expenditure from an initial value recorded to a Balance Sheet account to be spread over a selected time period (months, quarterly etc.) to appropriate income or expenditure accounts.
Usually only relevant when accrual accounting (Income and Expenditure reporting for Not-for Profit organisations) is adopted; the balance sheet accounts used must be the system accounts
- Accruals and Deferred Income
- Items which owed or potentially owed by the organisation to third parties and are classed as account type - Current Liabilities.
- Prepayments and Accrued Income
- Items which third parties owe or potentially owe to the organisation and are classed as account type - Current Debtors
Sub-accounts of these two may also be used. Note if the accounts are not currently in the organisation's chart of accounts add from the list of standard accounts.
Accounts - Add Standard Accounts
Sub-accounts can be created via Add a Custom Accounts being sure that any account created is a sub-account either of Accruals and Deferred Income or Prepayments and Accrued Income
Setting up a Prepayment Schedule
In summary the process is :-
- Create the initial transaction with the value that will subsequently be spread to accounting periods
- Navigate to the transaction and from the Action Box select Add Prepayment Schedule
- Enter the schedule details and click SUBMIT
- The system will post Journal Entries to reflect the dates and and selections made on the schedule
Examples of common situations and approaches
- Accrual means an expense that is incurred in a period but not paid until a future accounting period. See Example
- Deferred Income
- Deferred Income is where monies are received for goods or services not yet earned. See Example
- Payment is made for service or goods which are yet to be provided and is not treated as an expense until it is. See
- Accrued Income
- Accrued Income is where goods or services have been provided but payment has not been requested or received See Example
Deleting a prepayment schedule
An existing prepayment schedule can be deleted by navigating to Prepayment Schedules.
Control - Prepayment Schedules - Use the filters to locate the relevant schedule
From the Action Box click DELETE. Any remaining scheduled items will not be posted and the schedule will be removed.
Note scheduled items that have already been recorded will NOT BE DELETED by this process. If required they will have to be deleted as individual journals. The user will still need to deal with any remaining balances on the Accrual and Deferred Income or Prepayments and Accrued Income accounts.