Re: [SL] Handling prepayments

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

Ah, of course, silly me, makes perfect sense now - thanks!

Michael


On Feb 14, 2007, at 8:41 PM, Dr Eberhard Lisse wrote:

> 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?
>
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