Adrien, It seems to me that what you want is not an accounting solution but a software enhancement. I believe that you need to say exactly what you want in a bugzilla RFE. For the issue you describe below what seems to be required is a special version of scheduled transactions which will post a bill. Your purpose seems to be to delay the increase in assets and liabilities until a time period near to the date that the bill will be paid.
I believe that you wrote something incorrect here: > Additionally, as noted in another reply, ‘bills’ for pre-paid expenses >should never hit AP at all. They aren’t ever liabilities. They are (as >yet unpaid) deferred expenses, not accrued expenses. It is not the pre-paid expenses that are being entered into AP it is the obligation to pay for them that is in AP and that is a liability. From an accounting perspective this is exactly what is required. The not yet existing asset pre-paid expense is being offset by a corresponding liability so that the net on the balance sheet is 0. Once the bill is paid the liability is 0 and the pre-paid expense becomes real. One other note is that this question of when to recognize an obligation to pay is a subtle one and really requires an accounting expert familiar with the type of business. A cash flow problem could be hidden by manipulating recognition dates. Dale On 12/17/2017 01:46 PM, Adrien Monteleone wrote: > Dale, > > Thank you, but in my case the first event to happen (for me) is the bill > arriving. > > Here is the sequence: > > 1) Renewal bill is generated > 2) Renewal bill is mailed > 3) Renewal bill arrives in the mailbox > 4) Renewal bill is entered in GnuCash with date of #1 as ‘opening date' > 5) Renewal bill is ‘posted’ in GnuCash with current date as ‘posting date' > 6) Renewal bill is paid > 7) Renewal policy goes into effect > > There is usually a one-week gap between 1 & 3. 3,4 & 5 usually happen on the > same day. There is usually a 4-5 week gap between 3 & 7. The period boundary > usually happens between 5 & 6, but sometimes between 6 & 7. > > The pre-paid expense should not appear until 6 is complete, but is currently > happening at 5. The date of 6 is unknown until it happens, so I can’t ‘fudge’ > and choose it as the posting date beforehand. > > Additionally, as noted in another reply, ‘bills’ for pre-paid expenses should > never hit AP at all. They aren’t ever liabilities. They are (as yet unpaid) > deferred expenses, not accrued expenses. So I’ve opted to bypass the Business > Features entirely for this special case and forego the bill reminder as well > as any ability to see this activity in a vendor report. > > > Regards, > Adrien > >> On Dec 16, 2017, at 4:36 PM, Dale Alspach <alspac...@gmail.com> wrote: >> >> Adrien, >> >> I do not use the business features but it seems from what you have >> written that something like the following may do what you want. >> >> Create a new liability account named Unbilled Payables (or whatever you >> like). >> Replace >>> Dr. Assets:Current_Assets:Pre-Paid_Expenses:Auto_Insurance >>> Cr. Liabilities:Accounts_Payable >> by >> Dr. Assets:Current_Assets:Pre-Paid_Expenses:Auto_Insurance >> Cr. Liabilities:Unbilled Payables >> >> There is no change in the Balance Sheet net. The entry in Unbilled >> Payables should be tagged so that an audit trail could be constructed. >> >> When the bill arrives, post the bill so that you effect a transfer >> between the liabilities >> Dr. Liabilities:Unbilled Payables >> Cr. Liabilities:Accounts_Payable >> >> Again there is no change in the Balance Sheet net. At this point the >> normal flow of the business features should generate your reminder and, >> upon payment, zero the liability for the pre-paid insurance. The asset >> becomes real. >> >> Dale >> >> On 12/15/2017 02:57 PM, Adrien Monteleone wrote: >>> Yes, I can explain. And the example of insurance is just that. A pre-paid >>> expense IS an asset. (in accrual accounting) >>> >>> I pay in advance for auto insurance. The policy renews every 6 months. (for >>> me, this is in December and June) >>> >>> Paying in advance is a pre-paid expense. This is an asset. I have not yet >>> received ‘service’ from the insurance company. >>> >>> Here’s what the entry should be twice a year: >>> >>> Dr. Assets:Current_Assets:Pre-Paid_Expenses:Auto_Insurance >>> Cr. Assets:Current_Assets:Cash >>> >>> As I receive ‘service’ each month, or ‘use’ the asset, I credit the >>> pre-paid expense account and debit the actual expense account for one-sixth >>> of the asset (as this is a 6-month policy): >>> >>> Dr. Expenses:Auto:Auto_Insurance >>> Cr. Assets:Current_Assets:Pre-Paid_Expenses:Auto_Insurance >>> >>> The original question was trying to resolve the issue of posting the bill >>> from the insurer for each renewal and how that affects recognition of the >>> acquisition of the pre-paid expense asset. >>> >>> My current entry from the bill is: >>> >>> Dr. Assets:Current_Assets:Pre-Paid_Expenses:Auto_Insurance >>> Cr. Liabilities:Accounts_Payable >>> >>> and then when I pay it: >>> >>> Dr. Liabilities:Accounts_Payable >>> Cr. Assets:Current_Assets:Cash >>> >>> Technically, legally, I don’t have this asset until I actually pre-pay. The >>> generation of a paper bill from the insurer is not an activity that either >>> is the earning of income on their part, the incurring of an expense on >>> mine, or even the assumption of a liability on the part of either of us. If >>> I decline to pay the bill, the policy never goes into effect, I never >>> receive anything of value and the insurer earns nothing, owes me nothing, >>> and has no claim against me. (I don’t owe them anything) >>> >>> Posting the bill on any date other than the actual payment date creates the >>> problem of properly recognizing the asset. This is even more problematic if >>> the bill for renewal is received and posted into GnuCash in the period >>> prior to the renewal and payment date. (frequently the case - the bill >>> usually arrives in mid November/May) >>> >>> Note, I can’t find any guidance online on posting a ‘bill' for pre-paid >>> insurance. ALL examples I find state to make the above entry—effective on >>> the date of payment. I suspect this is because it is a shift in assets that >>> cannot occur until it actually does. This is not a cash vs. accrual >>> problem. The very use of the pre-paid expense account is a practice of >>> accrual accounting and NOT cash basis accounting. (on a cash basis, the >>> entire premium would be expensed when paid) >>> >>> Accrual vs. Cash doesn’t mean "document-dates vs. payment-dates." It means >>> "activity-dates vs. payment-dates.” >>> >>> In fact, I see very little guidance with reference to the receipt of bills >>> or issuing of invoices. What I see is how to make entries for when the >>> relevant activity trigger takes place. (an expense is incurred or revenue >>> is earned) >>> >>> In the case of a pre-paid expense, (a deferred expense) the activity takes >>> place in later periods than the payment date. So the expense has to be >>> accrued as it is incurred. In the case of an accrued expense (the opposite) >>> the expense is recognized when incurred, and is booked as a liability until >>> paid. >>> >>> It seems the business features only contemplated accrued expenses. (and >>> conversely on the invoice side, did not consider un-billed work) >>> >>> So posting this bill shouldn’t even be a liability, it’s not an accrued >>> expense, it’s a deferred expense. It should never hit AP but I can’t see >>> anyway around that the way the system presently works. >>> >>> A complication is that the Bills Due Reminder feature only works on posted >>> bills because that is when you enter the due date.(it can’t calculate >>> anything without it, unless you have fixed terms, but even with that, >>> unless you post, the reminder will not be triggered) >>> >>> It would be nice to enter the bill when received in GnuCash and have it >>> show up on the Bills Due Reminder, but that seems impossible in this case. >>> I can certainly enter the bill when received, but I can’t post it till I >>> pay it or else my assets will shift too soon. >>> >>> I suppose I could bypass the business features all together, but then I >>> don’t get the benefit of a bill reminder, or an easy to follow history with >>> that vendor. (manual transactions won’t show up on the vendor report) >>> >>> I’ve decided on this approach for now: >>> >>> Set a reminder in my OS calendar to enter and post the bill as a manual >>> transaction when I actually pay it. >>> >>> This means I can’t see this transaction on a vendor report and I can’t see >>> my ‘due dates’ all in one place - GnuCash. >>> >>> However, my AP won’t have an erroneous entry and my assets won’t be >>> inflated in November and May of each year. >>> >>> Regards, >>> Adrien >>> >>>> On Dec 15, 2017, at 9:51 AM, Derek Atkins <warl...@mit.edu> wrote: >>>> >>>> Adrien, >>>> >>>> Adrien Monteleone <adrien.montele...@gmail.com> writes: >>>> >>>>> Sorry, allow me to rephrase, when do I acquire the pre-paid expense ASSET? >>>> >>>> Can you please explain what you mean by a "pre-paid expense asset"? Is >>>> it an Expense? Or is it an Asset? >>>> >>>> Could you give a concrete example of something that is a "pre-paid >>>> expense asset"? >>>> >>>> Sorry for being dense, but I still don't grok what you're trying to do >>>> or how this is mapping into a real-world transaction. >>>> >>>>> Please remember to CC this list on all your replies. >>>>> You can do this by using Reply-To-List or Reply-All. >>> >>> Sorry, I thought I did. I usually do this by backing-out the personal >>> e-mail and replace it with the list email when I start each reply. I really >>> wish Apple Mail would handle ‘reply to list’ properly to save me the >>> trouble. I stuck with Thunderbird for many years on that point alone but >>> finally made the switch for integration advantages. My apologies. >>> >>>> >>>> -derek >>>> >>>> -- >>>> Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory >>>> Member, MIT Student Information Processing Board (SIPB) >>>> URL: http://web.mit.edu/warlord/ PP-ASEL-IA N1NWH >>>> warl...@mit.edu PGP key available >>> >>> _______________________________________________ >>> gnucash-user mailing list >>> gnucash-user@gnucash.org >>> https://lists.gnucash.org/mailman/listinfo/gnucash-user >>> ----- >>> Please remember to CC this list on all your replies. >>> You can do this by using Reply-To-List or Reply-All. >>> > > _______________________________________________ > gnucash-user mailing list > gnucash-user@gnucash.org > https://lists.gnucash.org/mailman/listinfo/gnucash-user > ----- > Please remember to CC this list on all your replies. > You can do this by using Reply-To-List or Reply-All. > _______________________________________________ gnucash-user mailing list gnucash-user@gnucash.org https://lists.gnucash.org/mailman/listinfo/gnucash-user ----- Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
