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Sage Prepayments Function

31st July 2011

Paul from Michael Paul Accountants Northamptonshire reviews the prepayments option in the Sage accounts month end function.

The concepts of prepayments and the method for running the month end Sage procedure have been described in earlier articles.  The article focuses on how to set prepayments within Sage to automatically post when the month end procedure is run and the Post Prepayments option is selected.

My earlier prepayments article used the example of a company receiving an invoice dated in January for 12 months insurance at a total cost of £1,200. I shall use the same example here.

There are several ways in which the prepayment journal entries on Sage can be made:

  1. They can be made each and every month which can be time consuming and opens up the scope for errors if the journal adjustment is forgotten
  2. All the journal entries can be made in one go and dated in advance.  This is okay for experienced users but for those less confident with Sage may be somewhat daunting and if done incorrectly can create problems.
  3. To use the built in Sage Prepayment function as described below.

The Sage prepayment function is relatively straight forward to use.  Using the insurance example we can follow through the individual steps needed to step up the prepayment.

  1. From the Company Module click Nominal Ledger (Links Pane)
  2. From the Nominal Ledger window, click Prepay
  3. Enter the following information
    • N/C – In this case this would be the nominal code of your insurance nominal account (commonly 8204)
    • Details – e.g. ‘Insurance Prepayment’.  If there are several insurances you may wish to add more details such as ‘Public Liability Insurance Prepayment’
    • Dept & Fund – Many companies do not use these fields so only complete them if necessary
    • Prepayment N/C – This is the nominal code of the prepayments account (commonly 1103)
    • Value – The total value of the prepayment.  The easiest way to do this is to set the prepayment as the whole invoice amount (£1,200) then when the January month end is run £100 will be transferred back to the insurance nominal leaving the prepayment at the end of January at £1,100
    • Months – the number of months over which the prepayment is to be spread, in this case 12
    • Monthly Amount – this is calculated automatically by Sage from using the total prepayment value and the number of months the prepayment is to be over.
    • Posted – this is another display only box and shows the number of prepayment which have already been made.

Each time the month end procedure is run a journal will automatically be made crediting the prepayments account and debiting the insurance expense account with £100.  Once the 12 month period is up Sage will detect that the full 12 postings have been made and no further entries will be posted.

At Michael Paul Accountants Kettering, Corby, Northampton and Market Harborough are conveniently located near to our premises in Lamport although we have clients from all over the UK.  We are a firm of Chartered Certified Accountants ensuring you receive a professional and competent service at all times.  We specialise in small businesses, medium sized businesses, sole traders, partnerships and individuals who have to file a tax return.

If you need any advice regarding Sage or any other accounting or taxation matters please don’t hesitate to contact us.

 

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