You've now created the prepayment. This is processed the next time you run the month end routine and select the prepayment check box. Read more >
Automatic prepayment postings
EXAMPLE: A prepayment of £/€600.00 is made once every three months in advance for rent, and the cost is to be accounted for over the three month period. The rent invoice or payment is processed as usual as a purchase invoice or a bank payment to the rent nominal code. Once the prepayment has been created, the following transactions are posted during the month end routine.
Month 1
| Transaction | N/C | Nominal Name | Debit | Credit |
| Prepayment Reverse | 1103 | Prepayments | 600.00 | |
| Prepayment Reverse | 7100 | Rent | | 600.00 |
| Prepayment 1 | 7100 | Rent | 200.00 | |
| Prepayment 1 | 1103 | Prepayments | | 200.00 |
In month one the reverse prepayment immediately cancels the effect of the original payment or invoice. The monthly value is posted back to the rent nominal code so that the rent account has a monthly cost of £/€200.00 rather than the original £/€600.00.
Month 2
| Transaction | N/C | Nominal Name | Debit | Credit |
| Prepayment 2 | 7100 | Rent | 200.00 | |
| Prepayment 2 | 1103 | Prepayments | | 200.00 |
Month 3
| Transaction | N/C | Nominal Name | Debit | Credit |
| Prepayment 3 | 7100 | Rent | 200.00 | |
| Prepayment 3 | 1103 | Prepayments | | 200.00 |
At the end of the last month, the net effect on the prepayment nominal code is zero as the original reverse posting, in month 1, is cancelled out by the three monthly instalments.
TIP: If your prepayment amount can't be divided evenly by the number of months, any rounding is done in the final month.
Accruals
Set up an accrual
EXAMPLE: We're creating an accrual for a telephone bill that we receive every three months. We've estimated the charge to be £/€300.00.
- Go to Nominal codes, then click Accruals.
- Enter the relevant information to record the Accrual in the Accruals window, for example:
TIP: If preferred, you can click Wizard then follow the on-screen prompt.
| N/C | Nominal code, for example, Electricity |
| Details | Description, for example, Accrual |
| Department | Enter a department, if required |
| Fund | Enter a fund, if required. Only available if you've the charities option enabled. |
| Accrual N/C | Updated automatically |
| Value | Total net accrual value, for example, 300.00
TIP: If the monthly values change during the length of the accrual you should delete and read the accrual. |
| Months | Number of months for the accrual. This can be between 2 and 12. |
| Monthly Amount | Updated automatically |
| Posted | Updated automatically |
- Click Save, then OK.
You've now created an accrual, this is processed the next time that you run the month end option and select the accrual check box. Read more >
Automatic accrual postings
EXAMPLE: An accrual has been created to accrue a monthly charge of £/€100.00 for electricity, and the cost is accounted for over a three month period. The accrual postings are then reversed in the final period.
Month 1
| Transaction | N/C | Nominal Name | Debit | Credit |
| Accrual 1 | 7200 | Electricity | 100.00 | |
| Accrual 1 | 2109 | Accruals | | 100.00 |
Each month a monthly value is entered to your expense nominal code with the opposite entry going to your accruals nominal code.
NOTE: The Accruals nominal code is a current liability on the balance sheet as it shows the value of a service that's been used but not yet paid for.
Month 2
| Transaction | N/C | Nominal Name | Debit | Credit |
| Accrual 2 | 7200 | Electricity | 100.00 | |
| Accrual 2 | 2109 | Accruals | | 100.00 |
Month 3
| Transaction | N/C | Nominal Name | Debit | Credit |
| Accrual 3 | 7200 | Electricity | 100.00 | |
| Accrual 3 | 2109 | Accruals | | 100.00 |
| Accrual Reverse | 2109 | Accruals | 300.00 | |
| Accrual Reverse | 7200 | Electricity | | 300.00 |
In the final month, the total value of the monthly postings is reversed from your accounts. This reduces the balance on the accruals and expense nominal codes to zero.
The monthly balance on the expense nominal code for the final month is a credit balance. In the above example, after the final accrual posting the month three balance on the Electricity account is a £/€200.00 credit balance. If a report was run to show the monthly values, a liability would be shown in months one and two.
When the actual invoice or payment is posted, the balance changes to a debit balance which represents one month's value. For example, if the actual electricity bill was £/€315.00, £/€15.00 higher than accrued for, the month three balance would be £/€115.00.
TIP: If your prepayment amount can't be divided evenly by the number of months, any rounding is done in the final month.
Any discrepancies appear in the final month, this is because you don't know how much the invoice will be in advance so you make an estimate. If this happens you should leave the discrepancy in the final month.
If you miss a month
The month end routine must be run in month order. If you've missed a month and run the next month end, it isn't possible to go back and run it again.
If you've just run the month end routine, you should restore a pre month end backup then run the month end option for last month before running it for this month. You'll need to enter any transactions posted since you took the backup again.
What to do if you can't restore a backup
If you can't restore a backup, delete all prepayments and accruals and then continue to post them manually for the remaining period of the prepayment or accrual.
If you need to delete a prepayment or accrual from the list, use function key F8.