I have to invoice our parent company on a quarterly basis for our marketing costs.
To make sure that our management accounts are consistent every month, I have put a prepayment journal through for £11k per month (Sage : Dr 1103 / Cr 6201)
When I actually raise the invoice, I assume that I would then reverse £33k from the above nominals and post the actual invoice total to nominal 6202.
Could someone tell me if this is correct? I do prepayments for things like insurance, but wasn't sure if this was the correct procedure for when you know you are going to raise invoices on a quartly basis??
What you have is not a prepayment, but an accrual.
Prepayments (1103) are used where you have paid something in advance and will show as an asset on the b/sheet. An accrual (2109) is where you want to account for something in a period P&L, but haven't paid it yet and will show as a liability on the b/sheet.
