How to reverse out Opening Prepayment Balances
This article is for churches and charities that account on an accruals basis.
What is a Prepayment?
If you create accounts on an accruals basis, then at the end of the previous financial year, you will need to include deferrals for any expenditure that relates to the following financial year, but that was paid in that financial year.
At year-end, these will be shown as part of the 'debtors' on your balance sheet. A typical example is insurance which is paid upfront annually - where some of the amount paid relates to months that fall within the following financial year.
Note: only transactions of material value need to be recorded as a deferral in your prior year accounts. Typically, this would include items say with a value above £500 that 'land in the wrong financial year' on your bank statement. There is really no need to defer for small amounts, and doing so will complicate your year-end unnecessarily. If you are unsure, you should ask your independent examiner about this.
How to enter Opening Prepayment Balances
When setting up ExpensePlus, you will need to set up your opening fund balances. As part of one of these steps, you will be asked to allocate your opening prepayments balance to the different funds this relates to.
Don't worry if you don't have these figures just yet - you can set up your opening balances later.
How to reverse your Opening Prepayment Balances
If you have deferrals in multiple different funds, you might find it helpful to first select the fund.
Next, click the 'reversal' button to the right of the opening balance line as shown below.
Note: you can do this multiple times, so if your deferral total is made up of different expenditure amounts that relate to different expenditure categories, this isn't an issue.
When reversing out an opening balance deferral, you will be asked to select a date (this is the date the expenditure will appear within your current financial year). Often the first day of the financial year is selected.
Note: it's important that your opening deferrals are reversed against the funds they were allocated to in your opening balance (which is why we recommend doing this process 'per fund'). If not, your unreversed opening balance for all funds may well be zero, but not zero for each individual fund.
To help you better understand the Adjustments module as a whole, please visit the module overview page here.