Invoice & Bill Posting Date Issues Across Multiple Periods

[Adrien Monteleone]

> On Dec 13, 2017, at 9:24 AM, Derek Atkins <warlord at mit.edu> wrote:
> 
> Adrien Monteleone <adrien.monteleone at gmail.com> writes:
> 
>> I don’t think I’m mixing cash-accrual, but just to clear up any
>> confusion, let’s forget when I actually pay the pre-paid expense. When
>> do I incur it? When the bill is generated by the insurer? When I
>> receive the bill? When I enter it in GnuCash? When it is due? (the
>> effective date of the policy) In short, what should my posting date
>> be? (#2 below)
> 
> Well, when you incur the "expense" differs based on cash vs accrual
> accounting.  IMHO (IANAA) you incur the expense (under accrual) some
> time between when the bull is generated and when you receive it.  Under
> cash it's of course when you pay it.

Sorry, allow me to rephrase, when do I acquire the pre-paid expense ASSET?

I can’t acquire it until I pay the bill. It’s impossible otherwise.

Until that bill is paid, I have no claim against the insurer and the insurer certainly has yet to deliver their service. (this is pre-paid)

They have no claim against me until they deliver that service.

A pre-paid asset expense only comes into being when an actual pre-payment is made, not a moment before. I doubt any court would award me any claim to such an asset just because the insurer sent me a bill.

Certainly, the insurer doesn’t owe me anything. I have nothing on deposit with them yet. They won’t show any liability to me on their books. (and they certainly won’t have booked any income or revenue)


> 
> [snip]
>> I’ll wait for now. I see this as a separate issue. I'm not asking a
>> question of cash vs. accrual for post-billed expenses, but single
>> vs. multiple posting dates. Just under an accrual method, a
>> multi-period bill/invoice is not recognized properly in one step. It
>> still (like paper) requires correcting entries to accrue amounts back
>> and forth across period boundaries. I see that the needed info is
>> already present in the bill/invoice, just not being used.
> 
> As I said in my last reply, there is a 1:1 mapping of Invoice <->
> Transaction, so you cannot have "multiple posting dates".  If that's an
> issue, then enter multiple invoices.
> 
> You CAN have a single invoice (with a single date) that collects
> multiple days or work.  For example, if I get my car serviced the work
> done could take a week -- the bill I receive from them has a single
> date, but the line-items each have individual dates.  It doesn't matter
> if the car was in the shop across an accounting period boundary -- it's
> a single bill and gets entered/dated when you receive it.
> 
> Maybe you need to supply a use case where you actually receive a single
> bill for something that actually needs to be split across multiple
> periods.  I still don't see that here. 

The telephone bill was one such example. It DOES matter when I make the calls because that is when service was delivered, when I incurred the expense. I don’t incur the expense on the date the paper bill is generated and the phone company doesn’t earn the revenue on that date either. They earned it when they connected the phone call. Recording this on the date of the bill or the date I received the bill, or the date I enter it in to my accounting system, or it’s due date all would violate proper period recognition of the expense.
> 
>> Now, maybe making this change would help both use cases, but the cash
>> case still depends on payment dates, and I’m not concerned with
>> payment dates at all here, just single vs. multi-period postings.
>> 
>> My apologies if addressing the pre-billed/pre-paid recognition
>> question at the same time as the single/multi-period posting question
>> confused things. I considered separating the posts and probably should
>> have. They are two separate issues.
> 
> I think they are related issues.  There's a question of when the value
> hits your A/R or A/P accounts, when it hits your Bank account, and when
> it hits your Income/Expense accounts. Of course there's the added
> question of what do you do with the value if you necessarily need to
> split the dates of when it hits A/R;A/P vs when it hits your
> Bank;Income/Expense.
> 
>> Thanks for your insights,
>> Adrien
> 
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> 
> -derek
> 
> -- 
>       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
>       Member, MIT Student Information Processing Board  (SIPB)
>       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
>       warlord at MIT.EDU                        PGP key available