Re: [SL] Handling prepayments

[Dr E. L. <el...@li...>]

Neil,

this is not clear, at all, it's actually quite confusing.

What I do is:

Receipt of Funds, Cash, Check, EFT or whatever:
GL entry:
	Debit Bank Account
	Credit Pre-Payment Account

Provision of Service
Sales Invoice:
	Generate, Email and Post Invoice. SQL-Ledger does its thing
	(debits Account Receiveable)

"Pay" Invoice:
Cash->Receipt
	Payment (pull-down): Pre-Payment Account (not Bank Account)
	SQL-Leder does its thing (credits AR, debits Pre-Payment
	Account, ie moves funds from Pre-Pay to AR, so the
	transaction does not involve the bank account)


Michael,

Remember, *double* *entry* accounting?

One half (entry) of a transaction shows where the money is. In the bank
account, where it remains.

The other half shows what it is for, liability.

Later you only change the latter, ie the Cash->Receipt allocates it from
the Pre-Pay to the AP (invoice). Again, this is a double entry but does
not involve the bank account.

greetings, el

on 2/15/07 3:59 AM Neil Johnson said the following:
> Accounting entries for prepaid revenue:
>
> 1.   Invoice to Customer
> Debit customer (balance sheet)
> Credit prepaid revenue account (balance sheet)
>
> 2.   Receipt of Cash
> Debit cash
> Credit customer
>
> 3.   Revenue Recognition
> Debit prepaid revenue (balance sheet)
> Credit  revenue (P&L)
>
> You do 3. each time the revenue is to be recognised (i.e monthly,
> quarterly whatever).
>
> If revenue recognition depends on cash receipt then don't do 3. unless
> the customer has paid.
>
> Hope this is clear....
>
>
>
> Michael Hasse wrote:
>> All the responses make sense and are greatly appreciated!  (And I
>> actually have taken some accounting classes, but they were years
>> ago.  :)
>>     What I am trying to figure out is how the bank account balance in
>> the GL can reflect the funds that are posted to the liability account
>> (s)...?  E.g. somebody purchases a prepaid block of time for $10k,
>> that money certainly hits the bank account in the real world but if
>> it's posted to the liability account in SL, won't our bank balance in
>> SL fail to show it?