Prepaid Services (Unearned Income, Unearned Revenue)

[John Edwards]

On Mon, Aug 17, 2009 at 6:57 PM, rshgeneral <rshgeneral at yahoo.com> wrote:

>
> I'm a new gnucash  user helping someone switch from quickbooks.  I'm not
> sure
> how gnucash handles prepaid services.  In accounting, I believe I would
> credit (increase) a Prepaid Services account (a liability account) and
> debit
> (increase) a checking account.  Using this process would produce the
> correct
> accounting result, however, I just want to be sure that there is not
> already
> a proper way to do this in gnucash using invoices.  I'm not even sure if
> you
> are supposed to create an invoice for a prepaid service.  Whenever I try to
> create an invoice, it allows me assign it to an income or liability account
> (i like).  When I try to post the invoice, I'm restricted to posting it to
> Accounts Receivable (i dont like).


If you have a contract that calls for payment on date x, with the services
to be provided on date y, you could be posting the invoice to AR. For
example, if you sign a contract that calls for payment by January 1, with
the service to be provided on June 1, that becomes an AR transaction as of
January 1.

The account would be receivable on date x (Debit AR, Credit Prepaid
Services), the payment made on date y (Debit Cash, Credit AR), with the
service actually provided on date z (Debit Prepaid Services, Credit
Revenue).

John

-- 
John Edwards
"You can insure against the weather, but you can't insure against
incompetence, can you?" - Phil Tufnell