Creating prepayments

Prepayments are created at the time of posting using a Nominal Bank Payment (NBP) or when recording the receipt of an invoice from a supplier using a Purchase Receive Invoice (PRI) transaction. An option on both posting slips allows you to indicate that you want to create a prepayment.

To create a prepayment using a NBP:

1. From the Accounts button drop-down, select Nominal Bank Payment (NBP).

2. Select the Prepayment option on the Summary tab. Once selected, a Journals tab appears. This is where the journal entries are created.

3. Complete the information on the Summary tab and click Next.

4. On the Journals tab, enter the prepayment details. These are used to generate the journal entries.

• Reference. Specifies a reference code for the prepayment journal entries.

• Description. Specifies a brief description of the prepayment journal entries.

• Prepayment account. Specifies the prepayment nominal account. Defaults to the account defined in System Setup. See Controls and defaults.

• CC/Branch. Shows the cost centre/branch entered on the Summary tab.

• Amount. Shows the amount entered on the Summary tab.

• Start date. Specifies a start date for the prepayment journal entries.

• Recurrence pattern. Specifies the frequency with which the prepayment recurs, e.g. Daily, Weekly, Monthly or Yearly.

• Every. Specifies how often the prepayment recurs, e.g. every week, every 3 months, etc.

• Occurrences. Specifies how long the prepayment recurs, e.g. 4 weeks, 3 months, 1 year, etc.

5. Click Generate. The journal entries are automatically created and displayed in the browse window at the bottom of the Journals tab. You can modify the date, journal text and amount of each journal entry by clicking into the appropriate cells of the browse.

6. Click OK. The journal entries are posted to the Nominal Ledger with a status of Unposted if added to a batch and Cleared if updated straight away. The software automatically checks to see if all periods are open for the posting year and blocks the posting if not. If the posting includes journals in a future year then these are permitted, but are only be posted once the future year is opened.

To create a prepayment using a PRI:

1. From the Accounts button drop-down, select Purchase Receive Invoice (PRI).

2. Complete the main invoice details on the Summary tab and click Next.

3. On the Analysis tab, click Add and select Nominal. Once selected, a Journals tab appears. This is where the journal entries are created.

4. On the Journals tab, enter the prepayment details and click Generate. This tab operates in exactly the same way as the Journals tab on the NBP posting (See step 4 and 5 above).

5. Click Save. The nominal invoice line is created. Repeat as required.

6. Click OK. The journal entries are posted to the Nominal Ledger with a status of Unposted if added to a batch and Cleared if updated straight away. The software automatically checks to see if all periods are open for the posting year and blocks the posting if not. If the posting includes journals in a future year then these are permitted, but are only be posted once the future year is opened.

Notes

• Journal entries are calculated equally across the occurrences with any rounding up or down allocated to the first journal occurrence.

• Accruals can have multiple payments allocated/posted against them, but prepayments can only have a single payment allocated/posted.

• Preset postings can be used with NBP and PRI postings, but the preset information does not include prepayment details.

• The Nominal Journal (NJ) transaction can be used to make manual postings to prepayment and accrual accounts.

• The Purchase Receive Credit (PRC) posting cannot be used to make adjustments to either the accrual or prepayment controls. The NJ posting should be used.

• The journals created by NBP or PRI transactions are classified internally as Nominal Journal Prepayments (NJPs). The effect of recording a prepayment is that the prepayment amounts are shown on the Balance Sheet. These amounts are not shown as expenditure in the firm's Profit & Loss (P&L) account until the goods or services are received. Then the amounts are passed through the P&L and deducted from the prepayments section of the Balance Sheet. This allows you to see the effect of already committed postings on future months and years.