[GNC] How To Handle Prepayments

[Adrien Monteleone]

Stan,

Assuming one uses a bank at all...


But even then, if you record the pre-paid expense when you get the bill 2 months early, your assets are off. (though not inflated, sorry, that was the wrong term)

You’re showing you have more pre-paid expenses and less money in the bank than you actually do. On the date of the payment that transaction will be correct, but not until then. Of course, for personal finances, one might not care that a balance sheet in the interim will be incorrect.

Regards,
Adrien

> On Dec 16, 2018, at 7:31 AM, Stan Brown <the_stan_brown at fastmail.fm> wrote:
> 
> 
>> From: Adrien Monteleone <adrien.monteleone at lusfiber.net>
>> 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.
> 
> Why not use your bank's bill-pay service to schedule the bill payment?
> At least in the US, such services are typically free, and in fact you
> make money because you don't have to use a stamp, not an envelope, or a
> paper check, all of which cost money to replace.
> 
> When I get the bill -- and in my case it's almost two months in advance
> for six-month auto insurance -- I immediately schedule bill pay for the
> due date and then record:
> 
> Debit:  Assets » Prepaid Expenses » Auto Insurance
> Credit: Bank Accounts » Bank X
> Description: (Company) payment on (due date)
> 
> Thus I don't have to remember to pay the bill, my total assets are not
> inflated, and I know that money is earmarked so I don't accidentally
> spend Bank X down to a balance that is still positive but not large
> enough to cover the scheduled payment.
> 
> -- 
> Regards,
> Stan Brown
> Tompkins County, New York, USA
> http://BrownMath.com
> http://OakRoadSystems.com
>