As many businesses do we will pay for some services annually or quarterly. Alarm monitoring and other recurring services being examples.

Is there a way to setup the item when it is being entered into payable to be recorded as an asset (Prepaid expense) and then have it expense over a set number of months to a expense account.

I realize I could do this by putting the payable to prepaid and then creating 12 entries in the GL (1 each month) to expense it down. But I would like to find a way to automate this at the time of invoice entry.

If this does not exist it could be a good feature for future versions of the program.

Thank you

Hello Braedon,

Do you envision all the GL entries to the different fiscal periods being created when the item is posted in Payables? Or would you rather the entries moving from the prepaid expense to the actual exense be part of the period end in Payables? Or would you rather that this be part of generating a recurring entry in Ledger?

See - lots of choices, but sorry, there is no automatic method of handling this (yet).

Andrew:

I like this option "...entries moving from the prepaid expense to the actual expense be part of the period end in Payables".

The challenge would be managing prepaid's, what is the activation date? Expense 100% on activation date, or expense x number of months starting on the activation date. Then there will be the odd ball that needs a manual allocation.

Ideally we would need a report that reconciles the Prepaid asset account.

Lots to think about.

Since this post is from 2017, I would like to bump it and check again that there is no automation function in Adagio ledger to auto expense and a pre-paid item.

Say we pre-paid $1000 for a flight in Jan 2023. The flight is for Dec 2023.

In January 2023, we debit $1000 prepaid and credit $1000 cash
In December 2023, Adagio will auto expense the entry by debiting $1000 Travel Expense and crediting $1000 prepaid.

It will be so convenient. Save us having to track those kinds of little entries in a separate giant spreadsheet. I personally think it is useless to track those kind of variance in timing within the same year as long as the annual budget is in line but the leadership team think otherwise so we are spending so much time moving tiny expense from one month to another within the same fiscal year with no apparent benefit whatsoever. It is a sad story.

Nothing has changed since 2017.

But here's a way to do what you want, thinking way outside of the box.

Let's say the prepaid expense accounts are in the 1900 to 1999 range, department blank. You create 12 accounts for each related expense - 19XX-1, 19XX-2 ... 19XX-12, where the XX would link to the appropriate expense account (for example account 19TR), and the suffix is the department. Balance Sheet accounts don't generally have departments, so this should not conflict with anything.

In your example, when you enter the flight payment in January, you would code it to 19TR-12 because it's going to end up in December. And there it sits, displaying on the balance sheet with the other 19XX accounts, consolidated into one line.

Here's the trick. Set these prepaid accounts up as reallocation accounts, all twelve of them identically set up to reallocate to the appropriate expense account 100% (for 19TR each would reallocate to travel expense).

As part of month-end steps, in Ledger, you run Maintenance | Create Reallocation Batch, just for that month's department. So in December, it will be 19AA-12 to 19ZZ-12. It will automatically move the balances from prepaid for all of the department 12s to the appropriate expense, zeroing out the prepaid balance. It won't touch the other months' department balances.

One downside - it will only work for prepayments that are spread over 12 or fewer months. But they don't have to be within the same fiscal year.

Steve