No - your suggested journals are incorrect. There are a couple of problems.
Firstly, at no point are you actually setting up the prepayment in your accounts. As your colleague suggests, posting the invoice straight to prepayments is an easy way to do this.
Secondly, your monthly journal is the wrong way around: That journal is to reverse/reduce the prepayment, and show a monthly amount on the P&L - so you need to credit prepayments and debit rent.
-- Edited by VinceH on Tuesday 4th of June 2013 01:35:43 PM
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
I have a rent invoice dated June for periods Jul-Sep for arguments sake lets say it totals to £360.00 from what I understand of prepayments when using a supplier with VAT the entries would be like this
DR rent £360.00
CR supplier (creditor) £360.00
DR Prepayment £100.00 ( at the end of each month 1 month rent exclusive of VAT)
CR rent £100.00 (at the end of each month 1 month rent exclusive of VAT)
and continue for a further two months.
When payment is made
DR supplier ( creditor)
CR bank
Would you guys say this is correct? as a colleague of mine says i post straight to prepayment when entering the invoice in suppliers.
Thank you for your time and I would appreciate your response sorry if it was a bit long winded.
Unless I have misunderstood the question I would actually consider your colleague right.
Dr Prepayment £360 Cr Bank £360 (as you have prepaid in full)
Jul Cr Prepayment £120 Dr Rent £120
Aug Cr Prepayment £120 Dr Rent £120
Sept Cr Prepayment £120 Dr Rent £120
End of period Rent account has been debited with £360 Prepayment account is Empty £360 has gone from the bank
Tah da...
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
No, thats only when we're all dressing up as pirates Vince.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
