Prepayments and accruals

When you incur an expense over a number of periods but pay it with a single payment you can use the prepayments and accruals features to account for that expense across a number of periods.

When to use prepayments and accruals

Prepayments

Use prepayments to account for an expense that you have paid in advance and recorded as a payment from your bank account - but want to account for across a number of future periods. Expenses you could prepay include rent and insurance premiums.

For example, you pay your rent every six months and make the payment in January. You then account for that payment equally across the periods January to June with the prepayments feature.

See Enter a prepayment (advanced payment).

Accruals

Use accruals to account for a future expense that you normally pay in arrears. Expenses you could accrue include gas or electricity bills where you are charged quarterly.

For example, you pay your gas bill quarterly and having paid the June bill you estimate the cost of the next bill. You then spread that estimated cost equally across the three periods: July, August and September with the accruals feature. When the actual bill comes in you enter it as a payment in the normal way.

See Enter an accrual (anticipated expense).

Setting up

Before you enter any transactions, you need to:

• Create a nominal account for your accruals to post the periodic transactions to.

  Set this as the default nominal account for accruals so it is automatically displayed when accruals are set up.

• Create a nominal account for your prepayments to post the periodic transactions to.

  Set this as the default nominal account for prepayments so it is automatically displayed when accruals are set up.