Accounting for Prepaid Expenses and Accruals

Overview

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

Steps:

1. Accounting > Adjustments > Journal Entry > GL with auto reversal.
2. Enter the plan number.
3. Debit – suggestions below:
   • 125500 Prepaid Expenses--Admin
   • 225500 Prepaid Expenses--Capital Works/Sinking
4. Credit – use the same Expense code as the original invoice.
5. Date – use the original invoice date.
6. Reversal Date – the first day of the new financial year is suggested.
7. Amount – value of the original expense.
   • (NB. If the Owners Corporation is registered for GST, the amount entered should be exclusive of GST)
8. Description – this can refer back to the original invoice and why you are creating this journal entry eg. Adjust pre-paid insurance expense.
9. Click Save
10. Rebuild Annual Rollovers
    • Accounting > Adjustments > Rebuild Annual Rollovers

This will recalculate the expenses to incorporate the journal adjustment.