Re: [SL] Handling prepayments

[Michael H. <mh...@it...>]

Good point on the taxes!
    So to confirm I'm understanding, you've got a separate Liability  
account for each prepaying client?  And then as the funds are applied  
to invoices those amounts get moved over to the actual bank accounts  
on asset side of the balance sheet?  Are there two payment line items  
entered on each invoice then, one each for liability and asset?


Thanks!

Michael


On Feb 12, 2007, at 2:20 AM, Dr Eberhard Lisse wrote:

> I have a few clients who pre-pay or overpay, and for whom I have  
> created
>  Pre-Pay accounts (as Liability, because we haven't actually earned  
> the
> money, and thus we don't have to pay income tax on it :-)-O)). Then I
> have one for payments that pitch up in the bank accounts without
> identifying characteristics, and sooner or later the client will  
> let me
> know which invoice I can "pay" from that account.
>
> Auditors are very happy, but would like me to make more effort at the
> end of the financial year to lower the amounts in these accounts :-)-O
>
> el
>
> on 2/12/07 9:16 AM Michael Hasse said the following:
>> Hello everyone,
>>
>>     Just a thought/question regarding prepayment of services.  At the
>> moment when somebody prepays (or accidentally overpays) we make an AR
>> entry for that client with the check number, date paid etc and then
>> as the funds are applied to invoices we decrement the original AR
>> entry accordingly until the overage is depleted and then delete the
>> original entry all together.  This method does work but it is rather
>> prone to human error.
>>     And then I had an epiphany - could we not simply create an actual
>> separate AP account in the chart of accounts for each those clients?
>> And then "pay" invoices out of the appropriate account?  Is anyone
>> else doing this?  If so have there been any problems/pitfalls?  (Or
>> is there some third method that would be better than either of  
>> these?)
>>
>>
>> Thanks!
>>
>> Michael
>
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