What is the correct way to account for tuition delivered over a period of time to students e.g. a course costing £3,600 delivered over 12 months. Is it best to invoice for the whole amount when they enrol, but then from a sales point of view only accrue the income as it is delivered?
How best would you do this in Sage, on a month by month basis?
Also, if the tuition is subject to VAT, at which point is the VAT payable to the taxman?
I would book the invoice as normal and then journal 11/12 of the total to 'Deferred Income' account - assuming the invoice is issued in month one of the course lasting 12 months. Then, each month you journal one month of the original total from Deferred Income to Sales until month 12 were you journal the last 12th of the total. [ You can do this all right away as long as you remember to chanage the dates each time]. Basically you are only 'recognising' the income in the month the service is performed.
Remember this is just the Net invoice amount if you are VAT registered and the service is at standard rate.....and the total VAT will be due in the period it is invoiced i.e., the invoice date.
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Thanks for the tips. I have now set this up using the prepayment module to release the income from deferred income when running the month end.
I have another question...if a learner withdraws half way through and I want to then pull all the remaining income into the I + E at that point, I suppose I'd do this by posting a journal, but how do I cancel the prepayment releasing the money each month?
You should be able to go into the prepayment module and just delete the one you want to cancel before doing the month end. Easiest way is just to select the line you wish to delete and then click on F8
