Prepayments received from client

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1

I have been asked to make an invoice for a client for future work. This will be pre-payed but we will start work on this in May (financial year ends in April). Our costs (i.e. supplier invoices) will all incur in the next financial year.
I saw the guidance on pre-payments with future invoices, but I already made an invoice and it will be paid before year-end.
How do I post this in Quickfile?

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Hi @Erika

It sounds as though you have created the invoice and have received a payment for the work. In this case there are two options you could use.

  1. Allocate the payment to the invoice
  2. Hold the fund on account as a prepayment for works yet completed.

I hope this helps, but if you have any further questions, please don’t hesitate to ask.

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Hi Sian, thank you for your help! I’m trying to relate my study knowledge, which gets me confused…
option 1: yes, I can allocate the payment the the invoicebut doesn’t it then show as income on the date it came in?
option 2: I’m not sure how to “hold” the fund on account? Is that before I allocate?

In my studies we had to work with a prepaid income account. Take the payment out of this financial period and account for it in the next… (or should this be something I should do in the next FY?)
I will also have another project I’d need to split up between FY’s…
Sorry for all these questions… It’s so tricky to learn without experiencing it and vice versa…

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So you’ve already invoiced your customer but you want to recognise the income in a different financial year because the services have not yet been supplied?

In that case the simplest fix is an auto-reversing journal. On the last day of the current year make a journal that debits the sales nominal and credits a “prepayments” nominal in the assets and liabilities section, and set the journal to auto reverse on the following day (in the next financial year). This will take the income out of your P&L for this year and show it as a liability in your year end balance sheet, and the reverse journal will take it back into P&L for the following year.

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5

Great, thanks for the refresher! I appreciate your time ((:

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