Solution Properties
Solution ID:
200427112156300
Last Modified Date:
Wed May 21 09:49:35 UTC 2025
Taxonomy Path:
Case category//How do I...//processing
Author:
[email protected]
Set up and process manual prepayments
Description

Prepayments adjust your income or expenses to match the periods they relate to on your Profit and Loss report.

For example, if you receive a quarterly rent invoice in January. The full amount appears in January as overheads on your Profit and Loss report.  After posting your prepayment journal, the rent spreads evenly across January, February and March.

NOTE: In Sage 50 Accounts Professional, you can post prepayments automatically as part of the Month End routine. To upgrade, leave your details and we'll be in touch.

Cause
Resolution

Create the prepayment nominal code

  1. Go to Nominal codes, then select New.
  2. Complete the nominal record details as follows:
    • N/C - Enter the number for the nominal code you want to create, for example, 1103
    • Name - Enter the name for the nominal code, for example, Prepayments
  3. Click Save.

If required, repeat the above steps to create further nominal codes.

Post manual prepayments

There are three steps in this process:

▼ Post the actual transaction

When you make the payment or you receive the invoice, post this as a bank payment or purchase invoice. This procedure assumes you've already posted this transaction.

TIP: To split payment over more than one month, reflect this by part paying the purchase invoice with several purchase payments.

In this example: On 1 January, you post a bank payment of £/€3,000, with no VAT, to nominal code 7100. This is to cover the following three months. You run the Profit and Loss report monthly. At this point the rent on your Profit and Loss will affect January only:

  Jan Feb Mar
Rent 3,000 0 0
▼ Reverse the effect of the bank payment or purchase invoice

After you post the transaction, reverse the effect from your Profit and Loss to the Balance sheet nominal code for Prepayments. This is 1103 by default.

  1. Go to Nominal codes, then select Journal entry.
  2. Enter the reference and date for the journals. 

     

    NOTE: Use the same date as the original bank payment or purchase invoice.

  3. Enter the relevant information to record the reversal, for example:
    N/C Name Details T/C Debit Credit
    7100 Rent Prepayment Reversal T9   3,000
    1103 Prepayments Prepayment Reversal T9 3,000  
  4. Click Save and Close.

At this point the rent on your Profit and Loss won't affect any of the three months:

  Jan Feb Mar
Rent 0 0 0
▼ Post the prepayment journals

For each month, transfer the monthly value from your Prepayments nominal code to the rent nominal code.

 NOTE: Post these journals in line with the periods that you run your Profit and Loss report. For example, post the journals monthly if you run your profit and loss every month. If the period is partly in the current year and the rest in the next year, apportion the adjustments to reflect this. 

  1. Go to Nominal codes, then select Journal entry.
  2. Enter the reference and date for the journals.  NOTE: Enter the date as the last day of the month you're posting. 
  3. Enter the relevant information to record the reversal, for example:
    N/C Name Details T/C Debit Credit
    1103 Prepayments Monthly Prepayment T9   1,000
    7100 Rent Monthly Prepayment T9 1,000  
  4. Click Save and Close.

Repeat this procedure for every month affected by the prepayment. In this example, this is for the three months from January to March.

At this point the rent on your Profit and Loss report will show an equal value across the three months:

  Jan Feb Mar
Rent 1,000 1,000 1,000
Steps to duplicate
Related Solutions