Invoice & Bill Posting Date Issues Across Multiple Periods

Adrien Monteleone adrien.monteleone at gmail.com
Thu Dec 14 16:29:13 EST 2017


Thanks David,

I’m already following these procedures as you outline them in 1-4.

My hangup is in #2, I’m posting the pre-paid bill and thus increasing Assets:CurrentAssets:Pre-PaidExpenses:AutoInsurance before I actually acquire the pre-paid asset. Until I make the payment I really don’t have that asset. The insurer doesn’t have any of my money. No court would award me any value on an unpaid bill. I doubt any insurer could book the liability on their end until they had my cash in their hands. (treated as a customer-deposit most likely)

I don’t see any way around this other than two options:

1) just wait to post until I make the payment.
2) create an otherwise pointless ‘holding’ account to post to instead of the pre-paid asset, then make a transfer from that account to the pre-paid asset when I really pay the bill. However, I can’t make heads or tails of where that holding account should be classified. I don’t have new assets just for receiving a bill. I don’t yet have any expense (to be done periodically over time) and I don’t have any liability because I haven’t received anything of value not paid for.(a company doesn’t earn revenue and you don’t incur liability to them just because they generated a piece of paper and mailed it to you. They have to actually deliver a good or service to you.)

I get the difference between accrual and cash basis, but this seems to be one case that is impossible to be accrual. It seems it always has to be cash basis.

I think since this only happens twice a year, I’ll just handle that one case with #1. I’ll enter the bill in GnuCash, forego the Bills Due Reminder, and just post and pay together on the same day.


Regards,
Adrien

> On Dec 14, 2017, at 1:12 AM, DaveC49 <davidcousens at bigpond.com> wrote:
> 
> Hi Adrien,
> 
> I am assuming here you mean when you are pre-billed by a supplier of a good
> or service. What follows is not necessarily restricted to insurance or even
> to prepayment but just uses these to illustrate the principle. If you mean
> that you are pre-billing a client, my apologies and please ignore.
> 
> I think the issue is not that there is a single event associated with things
> like prepayments but that there are multiple events. If one wishes to meet
> the full requirement to provide an accurate reflection of events in your
> accounts, for example to handle the issue of pre-billing of insurance for a
> future accounting period you have (at least) the following events which you
> record in your accounts as they occur unless of course
> regulations/legislation specifies otherwise.
> 
> 1. Insurer issues an invoice to you.  You have no knowledge of this until
> you receive it. This doesn't appear in your accounts.
> 
> 2. You receive an invoice from the insurer. It will specify a due date and
> terms and conditions, possibly a discount if paid in advance or interest if
> not paid by the due date and an amount to be  paid at a future date.  You
> raise a Bill in your accounts. I would choose the date you receive the
> invoice from the insurer 
> as the post date as this is when you become aware of the obligation to make
> that future payment and receive in return insurance cover for an agreed
> period, which may or may not be from the due date even though it generally
> is.  You would record the bill with a debit to an Asset:PrepaidInsurance
> account and a corresponding credit to Liability:A/P created by posting the
> bill. You could equally use the date on the invoice issued by the
> insurer/supplier, unless there is a significant difference between the date
> it was issued and the date you received it, but the latter is really the
> most significant event associated with the bill for your accounts. (Dates on
> line items in the invoice from a general supplier to you may be relevant
> however if you are matching a particular expense to specific items of
> revenue of course).
> 
> 3. You pay the Bill at or before the due date. (Ignore the discount
> possibility.) Again I would use the date I raised a cheque, authorised a
> transfer from my account, handed over cash etc. depending on how I paid the
> bill. In the case of a cheque or where there may be a significant delay in
> an electronic funds transfer after you have authorised it, you may use a
> temporary clearing account to record that you have made the payment and then
> clear that account when the funds are actually transferred (cheque cleared
> or electronic transfer from your account recorded if this level of detail is
> of importance to you). In the simplest form this would be a credit to your
> Asset:Bank account and a debit to the Liability:A/P at the date you made the
> payment.
> 
> 4. The final step would be to expense the prepayment at periodic times
> during the period of the insurance with a credit to Asset:PrepaidInsurance 
> and a debit to Expense:Insurance. 
> 
> By capitalising the insurance prepayment, it can be carried through over
> into a future accounting period and expensed in that period.
> 
> I am not sure what you meant by "My issue isn’t the idea of a pre-paid
> asset, my issue is that it is increasing when I post the bill, not when I
> pay it."  I guess you mean the A/P balance by it or do you mean the Expense
> account (or an Asset account if it is prepaid). If it is the A/P balance,
> then that is the correct expected behavior as Derek has pointed out. If the
> posting date is not relevant to matching particular income then capitalising
> it to an asset account then expensing it at the relevant date wil do the
> trick. Next issue is whether the asset account should be under current
> assets, if it is to be expensed within the current period or in non-current
> assets where it is to be expensed in a succeeding period.
> 
> 
> 
> -----
> David Cousens
> --
> Sent from: http://gnucash.1415818.n4.nabble.com/GnuCash-User-f1415819.html
> _______________________________________________
> gnucash-user mailing list
> gnucash-user at gnucash.org
> https://lists.gnucash.org/mailman/listinfo/gnucash-user
> -----
> Please remember to CC this list on all your replies.
> You can do this by using Reply-To-List or Reply-All.



More information about the gnucash-user mailing list