Accounting for Prepaid Expenses and Accruals
In some cases, an invoice can be received and processed in the current financial period, however the expense may relate to a future financial period. E.G Insurance Premium – Coverage Period.
To reflect the expenditure in the appropriate financial period an ‘Auto Reversal Journal’ can be processed.
An example is shown below:
Financial Year End 31 January
- Accounting > Adjustments > Journal Entry > GL with auto reversal.
- Enter the plan number.
- Debit – suggestions below:
- 125500 Prepaid Expenses--Admin
- 225500 Prepaid Expenses--Capital Works/Sinking
- Credit – use the same Expense code as the original invoice.
- Date – use the original invoice date.
- Reversal Date – the first day of the new financial year is suggested.
- Amount – value of the original expense.
- (NB. If the Owners Corporation is registered for GST, the amount entered should be exclusive of GST)
- Description – this can refer back to the original invoice and why you are creating this journal entry eg. Adjust pre-paid insurance expense.
- Click Save
- Rebuild Annual Rollovers
- Accounting > Adjustments > Rebuild Annual Rollovers
This will recalculate the expenses to incorporate the journal adjustment.