Accounting Entries for Prepayments
Prepayments are possible through the use of prepaid vouchers. For accounting purposes, the net effect of a prepaid voucher is a merchandise voucher paid or partially paid by a prepaid voucher. Thus, instead of crediting a cash account, use the expense account for the prepaid voucher.
The following accounting entry examples are based upon these assumptions in addition to the assumptions made in the prior section:
The prepayment voucher is applied to the voucher described above (10,000 EUR).
The business unit is DEU01.
The prepayment amount is 1000 EUR.
Action: Prepaid Voucher Entered and Posted
The two accounting entries for the prepayment are prepaid expense and accounts payable. The accounting entry template populates the account for the prepaid expense entry during voucher creation. It is reversed when the prepayment is applied to the merchandise voucher.
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
|---|---|---|---|---|---|
|
DEU01 |
Prepaid Expense |
1000 |
EUR |
1000 |
EUR |
|
DEU01 |
Accounts Payable |
(1000) |
EUR |
(1000) |
EUR |
Action: Payment Created and Posted for Prepayment
Prepayments are never discounted. Posting the prepayment releases the payables liability and leaves the prepaid expense entry open.
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
|---|---|---|---|---|---|
|
DEU01 |
Accounts Payable |
1000 |
EUR |
1000 |
EUR |
|
DEU01 |
Cash Distribution |
(1000) |
EUR |
(1000) |
EUR |
Action: Invoice Received, Voucher Entered, Prepayment Applied to Voucher, and Posted
Posting the invoice and applied prepayment creates the following entries:
Accounts payable entry and expense entry for the merchandise voucher.
Accounts payable entry and expense entry to reverse the prepayment.
Payment processing:
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
|---|---|---|---|---|---|
|
DEU01 |
Expense Distribution |
10000 |
EUR |
10000 |
EUR |
|
DEU01 |
Accounts Payable |
(10000) |
EUR |
(10000) |
EUR |
Prepayment processing:
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
|---|---|---|---|---|---|
|
DEU01 |
Accounts Payable |
1000 |
EUR |
1000 |
EUR |
|
DEU01 |
Prepayment Expense |
(1000) |
EUR |
(1000) |
EUR |
Action: Payment Created and Posted for the Invoice Balance, Discount Not Taken
Posting the payment creates the following entries:
Cash entry for the balance of the merchandise voucher.
Accounts payable entry to fully reverse the liability balance.
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
Calculation |
|---|---|---|---|---|---|---|
|
DEU01 |
Accounts Payable |
9000 |
EUR |
9000 |
EUR |
10000 - 1000 |
|
DEU01 |
Cash Distribution |
(9000) |
EUR |
(9000) |
EUR |
10000 - 1000 |
Action: Payment Created and Posted for the Invoice Balance, Discount Taken
|
GL Business Unit |
Distribution Account Type |
Foreign Amount |
Foreign Currency |
Monetary Amount |
Currency Code |
Calculation |
|---|---|---|---|---|---|---|
|
DEU01 |
Accounts Payable |
9000 |
EUR |
9000 |
EUR |
10000 - 1000 |
|
DEU01 |
Cash Distribution |
(8800) |
EUR |
(8800) |
EUR |
10000 - 1000 - (10000 * .02) |
|
DEU01 |
Discount Earned |
(200) |
EUR |
(200) |
EUR |
10000 * .02 |