[GNC] How To Handle Prepayments
Tom Balaban
tbalabanjr at gmail.com
Sat Dec 15 18:37:13 EST 2018
Many thanks Adrien.
I think your explanation works except for a minor detail, after the
initial payment is exhausted all payments are after the fact.
Each month I submit a report of participant count for the prior month.
They will then send me a bill for the amount due.
I don't think there is anything prepaid regarding these subsequent
payments so I'm pretty sure I can just expense them.
Best,
Tom
------ Original Message ------
From: "Adrien Monteleone" <adrien.monteleone at lusfiber.net>
To: "Gnucash Users" <gnucash-user at gnucash.org>
Sent: 12/15/2018 4:41:12 PM
Subject: Re: [GNC] How To Handle Prepayments
>I’m not sure I’m entirely following the timing exactly, but many insurances, and it looks like your’s falls in this category, are pre-paid.
>
>Thus they are assets until they are ‘used’.
>
>So when you make the initial payment:
>
>Dr. Assets:Current Assets:Pre-Paid Assets:Insurance
>Cr. Assets:Current Assets:Cash/Checking
>
>You can handle that with a Vendor bill and Payment if you like.
>
>As the insurance is ‘used’:
>
>Dr. Expenses:Insurance
>Cr. Assets:Current Assets:Pre-Paid Assets:Insurance
>
>This can be handled with a manual or scheduled transaction as your situation dictates. (which could also be a vendor bill, if you didn’t use one for the initial payment)
>
>Subsequent payments are likely still in advance, and so would go to increase the pre-paid asset first and then when used, they are expensed.
>
>There is no need for involving A/P accounts or credit memos to adjust them. (unless you opt for the vendor bill route, but you still shouldn’t need credit memos)
>
>I had a thread some months back on a similar topic and the issue is something to consider:
>
>I receive a bill about a month in advance of the due date every six months for auto insurance. If I pay that bill early, or on time, I am gaining a ‘pre-paid’ asset to be used up over the next six months. My problem wasn’t using the bills feature to handle this, or the expensing (I just set up a scheduled transaction for that part) but that I couldn’t post the ‘advance’ bill without it posting to my assets right away. Yet, it isn’t an asset till I actually pay it. I was wanting to take advantage of the bills due reminder for this bill. I had to settle on waiting to post the bill until I actually make the payment and forgoing the reminder. That way, my assets weren’t inflated early. Otherwise, everything else works out fine.
>
>Regards,
>Adrien
>
>> On Dec 15, 2018, at 3:06 PM, tbalaban <tbalabanjr at gmail.com> wrote:
>>
>> My Company pays an initial payment to our insurer at the beginning of each
>> policy year. As we incur insurance costs based on event participants, that
>> initial payment is charged. After it is exhausted we get a monthly bill for
>> the amount due. In no case do we ever get the initial payment back.
>>
>> I'd like to treat the initial payment as a credit to insurer's A/P account
>> then each month create a bill for the amount payable.
>>
>> Is this the correct way to handle such a transaction?
>>
>> Assuming it is, how do I credit the amount due from whatever account I
>> posted the initial payment to?
>>
>> In practice we pay the initial payment in February, the start of our paolicy
>> year. Usually, in April or May, the initial payment is exhaused and we have
>> to send more money to pay that month's bill. I'm not at all clear on how to
>> post this situation.
>>
>> I'd appreciate knowing how to do this in GNUCash as well as any comments on
>> the applicable general accounting rules. In Quickbooks I could debit or
>> credit A/R or A/P diectly and selects the customer or vendor required. Since
>> that capabiity does not appear to be available in GNUCash, how do I post it?
>>
>> Many thanks for your already generous help.
>>
>>
>>
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>
>
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