Advance liability payments

[Robin Chattopadhyay]

On Sun, Oct 9, 2011 at 8:02 AM, Jim & Grace Flowers <
dondiegoflores at verizon.net> wrote:

> I'm using version 2.4.7 on Windows 7 Home Premium 32 bit.  I'm still
> learning how to use the program, but all in all, I like it.  However, I do
> have a question.  I'm on a budget plan for one of my utility suppliers.
> It's not municipal, it's a private business.  Should I set this up as a
> liability, as I pay each month, then when I have to "pay"  for the propane,
> just debit the expense account and credit the liability?  Right now, as I
> pay each month, I debit the expense account and credit the bank account.  I
> got to thinking about this, but don't know the answer.
>

Hi-

I'm on a budget plan with my electricity/natural gas supplier too. I've done
it both ways you describe, but I prefer the liability method (I treat it as
an asset, though).

Here are the accounts I use:
Assets:Checking
Assets:Prepaid Expense:Xcel Energy (utility company)

Expense:Electricity
Expense:Natural Gas

The fixed payment for this year is $155/month. So when I get the bill, the
entry to looks something like this:

1. Credit to Assets:Checking for $155 <-- represents payment to utility
company
2. Debit to Expense:Electricity for $79.47 <-- represents actual usage for
the period
3. Debit to Expense:Natural Gas for $21.09 <-- represents actual usage for
period
4. Debit to Assets:Prepaid Expense:Xcel Energy <-- represents surplus
between actual usage this month.

In winter months, split #4 is a credit to Assets:Prepaid Expense:Xcel Energy
indicating the deficit between the budget payment amount and the actual
usage. Every twelfth month, there is a true-up where the Prepaid Expense
account is brought back to zero. Some years there has been a surplus in that
account resulting in a lower payment or a deficit resulting in a larger
payment that month.

Robin