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Post Info TOPIC: Prepayments or debtor
Leger


Master Book-keeper

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Prepayments or debtor
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An electric bill is sent in April covering the previous 3 months.  Year end is March so I have two payments in Feb and March which shows the creditor as overpaid.  The January bill had an outstanding balance after payments were taken into account so part of the February payment is allocated towards it.

Does the balance remaining stay on that account (effectively making it a debtor) or do I need to show it as a prepayment?  I'm probably confusing myself as prepayments are for expenses not yet incurred yet whereas the electric is consumed before the bill arrives.



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John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Onion4Sage


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Hi John,

It'll be a Creditor's ledger account with a debit balance. The final accounts presentation of any Ceditors ledger accounts with debit balances would be in the Debtors section. Similarly, any Debtors ledger accounts with credit balances should be presented in the creditors section.

You'll put an accrual in for the charges for Jan-Mar based on the April invoice.

Hope this helps,




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Ian

Ian Brown FCA
Onion Reporting Software Ltd

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Sage accounts in Excel. No set-up necessary. Free 30 day trial.
Cheshire


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Hi John
You can have both prepayments and accruals for lecky bills as some is in advance and some in arrears with some companies.

Break it down with a T account John - always helps with such things.

Also Ive taught folk to do an actual timeline on a bit of paper (indeed, do that part first). Timeline - period covered by the bill. Map in year end in a different colour. Then you can see more clearly how many months should be in this year and how many in next. Works for expenses and income accruals and prepayments.

Ignore the payments for this process. Just look at the invoice. If you have no invoice you have to make a reasonable assumption as to what that invoice should be (you know when its expected!)

Other way to (more easily) remember it is perhaps - do you need to increase or decrease the expenses to reflect the correct position for the year? Then think - that needs a dr or a cr......then you can work out the opposite.

To practice I think its a good suggestion to do all three of the above methods each time as it sinks in better.

HTH

Hi Ian - super quick off the mark there and much more succinct! I was too busy typing to see your response!

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 Joanne 

Winner of Bookkeeper of the Year 2015, 2016 & 2017 

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Leger


Master Book-keeper

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Hi Guys 

Thanks, I wasn't actually thinking straight yesterday.  Of course the April bill will want accruing because it reflects the past 3 months. D'oh.  I was thinking it was one OR the other.

 

 

 



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John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Onion4Sage


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Hi John,

We've all been there. wink

Regards,



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Ian

Ian Brown FCA
Onion Reporting Software Ltd

www.onionrs.co.uk

Sage accounts in Excel. No set-up necessary. Free 30 day trial.
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