Prepayments - deal with an advanced payment

Use the Prepayments routine to create journal entries that account for an expense you have already paid, and spread it across several financial periods, not just in the period it is paid.

The routine creates an initial journal entry to clear the original payment for the expense from the Profit and Loss nominal account and add it to the Prepayment nominal account on the Balance Sheet. While the expense is in the Prepayment nominal account on the Balance Sheet, it is classed as an asset. This asset is gradually reduced as the periodic journal entries decrease the value on the Balance Sheet and increase the value on the Profit and Loss account over the period.

When you create a prepayments journalA record that holds one or more transactions for posting. Synonymous with batch in batch processing., any elements that are dated in future periods are held in the deferred waiting postings file. These posting will be transferred later, when those future periods are subsequently opened.

When creating the prepayments journal the routine:

• Accumulates a total for each periodic posting. This value must match the total value for the prepayment.
• Applies only one URNThe unique reference number assigned to a complete transaction to assist in tracing the progress of the transaction through Sage 200. This number is 12 digits long and comprises of: 3 digits for the user number, 2 digits for the source module in which the transaction was created, and a 7 digit sequential reference number. to all postings made.

• The nominated prepaymentThe process of deferring expenditure and income to the accounting period in which it is incurred. This usually involves setting up an asset on the Balance Sheet for bills paid in advance, and then releasing that asset by instalments to the accounting periods in which the service is actually provided. account is debited with the total amount of the prepayment and corresponding double-entry is made by crediting the expense account concerned. This is performed by the first journal entry.
• A credit posting is made for each of the periodic amounts to the prepayments account for each period involved and a corresponding debit posting is made to the expense account again for each period amount.