UK Debtors that are part prepayment

[CharityClerk]

Hi, sorry for the entry level query but I'm not a trained accountant, just a charity bookkeeper trying to prepare our year-end files for the auditor and tidy up all the cost centres on Xero!

I have a couple of year-end debtors to post where payments related to subscriptions that extended beyond the year in question into the subsequent year. I can't get my head around the logic of whether the debtor should be for the full amount or just the amount relating to the year in question! Please can someone help me because I seem to have a mental block on this...

Example: In October 2024, Charity X paid £240 for a subscription covering the period 1October 2024 - 30 September 2025. This cost was to be split 50/50 with Charity Y. So Charity Y owes Charity X £120.
Charity Y paid their debt of £120 in January 2025.
So do I do the year-end debtor for the total owed £120... and then a prepayment for £180 (being the portion of the full amount paid that relates to the following year)?
Or do I just do the year-end debtor for £30 because the remainder of what was paid in 2025 belongs in 2025 anyway?
And if so, how much is the year-end prepayment for (brain explodes...)

Hope this makes sense and sorry if it's a daft question. Thanks for helping me with it!

 

[Fidget]

Assuming your year-end is 31st March 2025 since you say that you're currently doing year-end stuff, the timeline of transactions would be:

1. Dr: Subscriptions £240
Cr: Bank £240

That's the recording of the original payment for the subscription

2. Dr: Receivables £120
Cr: Subscriptions £120

That creates the receivable that charity Y owes and reduces X's expense in the I&E by £120.

3. Dr: Bank £120
Cr: Receivables £120

That records the payment that Y has made for its share and clears off the receivable

4. Dr: Prepayments (£120/2 - 6mths April 2025 - Sept 2025) - £60
Cr: Subscriptions - £60

This leaves £60 of the subscription in the I&E for the 6mths Oct 2024 - Mar 2025, and puts the other £60 into prepayments.

5. Dr: Subscriptions in the new financial year April 2025, either £60 in one go, or £10 each month April to Sept
Cr: Prepayments either £60 in one go or £10 per month April to Sept

That releases the prepayment back into the I&E for the financial year it relates to.

It sounds very much like a homework question to be fair, because the real world doesn't get bogged down doing all that over £120. X would just expense it in full rather than bother with prepayments. Y would likely be told to sort its own subscription out.

 

[CharityClerk]

Assuming your year-end is 31st March 2025 since you say that you're currently doing year-end stuff, the timeline of transactions would be:...
It sounds very much like a homework question to be fair, because the real world doesn't get bogged down doing all that over £120. X would just expense it in full rather than bother with prepayments. Y would likely be told to sort its own subscription out.

Thanks, this has helped my addled brain unpick it! Our year end is 31st Dec. I work for two separately registered charities who have a joint board of trustees, so they often have shared management costs for things like subscriptions but have to maintain entirely separate sets of accounts.
I appreciate £120 isn't a lot in the corporate world - it's different for small parish charities
Thanks again for taking the time to advise me.