UK Prepayments query

[Jay2]

Hello everybody, quick query on year end prepayments.
Our financial year runs 01 april - 31 March .
If i receive a creditor invoice, dated march23 , but relates to april onwards and won't be paid until april also.

regarding our accounts
I enter the expense into march as invoice is dated march , but as it relates to next financial year period, eventhough it isnt paid at year end (310323) , i still include it in my year end prepayments to take out of 22/23 accounts and put it into 2324 ?

is that right ?

 

[Fidget]

Yes. I suppose it's more of a workaround than technically the correct thing to do. Ideal solution would've been not to have processed the invoice until P1 2023/24 if you knew it wasn't getting paid before 2022/23 year end.

 

[Jay2]

Yes. I suppose it's more of a workaround than technically the correct thing to do. Ideal solution would've been not to have processed the invoice until P1 2023/24 if you knew it wasn't getting paid before 2022/23 year end.

Thank you
I was unsure that if the creditor invoice has vat on if have to post it into your TB as the date on the invoice , however if it relates to April and arrives now dated March it looks like the easiest method is to post it as an April dated invoice , rather than post it as March then prepay it back out

 

[Shcoll]

Hello everybody, quick query on year end prepayments.
Our financial year runs 01 april - 31 March .
If i receive a creditor invoice, dated march23 , but relates to april onwards and won't be paid until april also.

regarding our accounts
I enter the expense into march as invoice is dated march , but as it relates to next financial year period, eventhough it isnt paid at year end (310323) , i still include it in my year end prepayments to take out of 22/23 accounts and put it into 2324 ?

is that right ?

Normally, accruals are recorded in the current period, by debiting Expense accounts and creditin

Hello everybody, quick query on year end prepayments.
Our financial year runs 01 april - 31 March .
If i receive a creditor invoice, dated march23 , but relates to april onwards and won't be paid until april also.

regarding our accounts
I enter the expense into march as invoice is dated march , but as it relates to next financial year period, eventhough it isnt paid at year end (310323) , i still include it in my year end prepayments to take out of 22/23 accounts and put it into 2324 ?

is that right ?

Normally, accruals are recorded in the current period by debiting Expense accounts and crediting A/P Account. On the first day of the first month of the new year we make a reverse general journal entries debiting A/P and crediting expense accounts. In the new year when we enter those invoices that were accrued last year the reversal upset them to zero.

Accruals of Receivable on the other hand, Receivable is debited in the current year and Sales Revenue is credited. The steps in accounts payable are repeated except Sales Revenue is debited and Account Receivable is credited to upset the recording that should be done in the new year.

In Prepaid Accruals, Cash is debited and a liability account is credited. When the revenue is earned, the liability account is debited and revenue is credited. This may in the current period or the next year.

 

[Accounting for Beginners]

Since the invoice has to do with a future time period, you may consider recording it as a deferred expense.

 

[puckdrum]

So if I'm understanding correctly, you received an invoice dated March 23 for an expense that relates to the April period and won't be paid until April, even though your financial year ends on March 31.

In terms of your accounts, it sounds like you should enter the expense into March as the invoice is dated in March. However, since the expense relates to the next financial year, you should include it in your year-end prepayments to take it out of the 2022/23 accounts and put it into the 2023/24 accounts. That way, the expense will be allocated to the correct financial year.