Handling payments in advance

[Derrick Ashby]

On Friday, 28 Jan Oliver Kiddle wrote:

With some expenses, the actual payments need to be made in advance of
when whatever is paid for is consumed. This is particularly the case
with things like holidays. What I'd like to do is have this expense
appear in reports against the date when it was consumed without
compromising the accuracy of dates for transfers from my asset accounts.

To achieve this, I can use a third account. When I make a payment, I
have two transfers with different dates: my bank account to the
"Payments in Advance" account and from the "Payments in Advance" account
to the expense.

The problem is that I'm not sure what account type I should use for the
payments in advance account. It isn't an asset and neither is it an
expense. An equity perhaps? A/Receivable is perhaps the closest?
Or is there a better way to handle this?

Oliver

----------------------

It's easier if you think more in terms of the purchase of goods.  If you buy, say, a couple of boxes of laser printer paper, you might enter that as an Office Expense, but until you use the paper it really is an _asset_. If you had an Office Supplies asset account you could post the expenditure from your cheque account to this asset account, and then post from there to an Office Expenses account whenever you used a ream of paper. A holiday you have booked and paid for, but not yet "consumed", is still an asset.  If you subscribe to a magazine, you can do much the same thing - enter the subscription as an asset, and every time you receive and read an issue, post from the Subscriptions asset account to some Expense account.  Of course, you can take this sort of thing too far...

Derrick