Example of an Deferred Income situation and approach

An annual invoice for business services is issued at the start of the year but the income is only earned and recorded as income as the service is delivered.

Record the initial invoice to the Accrual and Deferred Income Account as a liability (amount owed) until the each monthly service has been delivered and then recognise the income as a sale for that month.

For Organisations that are NOT VAT registered or operating the Standard VAT scheme

  1. Edit or Add a Sales Item for the service being provided; selecting the Accrual and Deferred Income Account found as a Current Liability
  2. Create a Sales Invoice, as usual, for the above Sales Item and covering the full year
  3. Navigate to the the Sales Invoice and from the Action Box select Add Prepayment Schedule
  4. On the Prepayment Schedule screen, select the Charged to Account to record the monthly sales income to, the start date, the Count and the interval for posting the Journal
  5. Click SUBMIT to create the schedule, the screen then displays the details. Any journals dated in history (prior to today's date) are posted and shown greyed out
  6. The system will record the journals for the No. Remaining
  7. Receive payments from the Customer in the usual way allocating to the Sales Invoice.
  8. At the end of the period an amount has been recorded as a sale in each month so that a balance on the Accrual and Deferred Income Account is zero

Note the sales invoice DOES NOT conform to being an Advanced Invoice.

For Organisations that operating the Cash Accounting VAT scheme

  1. Edit or Add a Sales Item for the service being provided; selecting the Accrual and Deferred Income Account found as a Current Liability
  2. Create a Sales Invoice, as usual, for the above Sales Item and covering the full year
  3. Navigate to the the Sales Invoice and from the Action Box select Add Prepayment Schedule
  4. On the Prepayment Schedule screen, select the Charged to Account to record the monthly sales income to, the start date, the Count and the interval for posting the Journal
  5. Click SUBMIT to create the schedule, the screen then displays the details. Any journals dated in history (prior to today's date) are posted and shown greyed out
  6. The system will record the journals for the No. Remaining
  7. Receive payments from the Customer in the usual way allocating to the Sales Invoice. VAT will be recorded on the VAT Return for each allocated receipt.
  8. At the end of the period an amount has been recorded as a sale in each month so that a balance on the Accrual and Deferred Income Account is zero

Note the sales invoice DOES NOT conform to being an Advanced Invoice.