Prepaid Expenses


T

Tony

Hi,

How does one account for prepaid expenses in Money? Let's say I pre-pay my
insurance. It will come in as an expense but will not reflect on my budget
properly??

Thanks in anticipation
 
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D

Dick Watson

I'm not sure I follow your case, but I use a category, not in Budget, called
"Miscellaneous:Deposit, credit to follow" for anything where I expect to
expense something in the future but am putting money into the deal now. Say
I put a deposit on some custom Koa wood furniture I order. Then I buy it
after it gets built. Here are the two transactions:

Txn1:
$2,000 Miscellaneous:Deposit, credit to follow

Txn2:
$875 (split)
$2,875 Housing:Furnishings
($2,000) Miscellaneous:Deposit, credit to follow

The Miscellaneous:Deposit, credit to follow category gets back to $0. The
actual cost of the item is expensed.
 
C

Chris Cowles

GAAP treatment of prepaid expenses is outside the normal range of practice
discussed here. You can still do it, though. Just create a 'bank' account
called 'Prepaid Expenses'. Make it 'in budget' on the details page of the
account.

Pay insurance by a transfer to that account. The insurance payment will not
be reflected in the budget, but will be reflected in cash flow. Scheduled a
bill to pay the periodic allocation of the expense, using the prepaid
expenses account as the source. Categorize to insurance. Those periodic
bills will be reflected in the budget.

Are you doing this for a small business that has to provide financial
statements to a bank, or something? Or for your personal financial accounts
only? If the latter, why bother?
 
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T

Tony

Hi,

Thanks for the prompt responses. I am doing this for a personal account and
will give your suggestions a try.

Thanks!
 

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