top of page
antoineabastian

How to handle prepaid expenses ?

Scenario: we receive an rental SaaS invoice for one year


We create and post an invoice journal, and D365 F&SCM should post this in a prepaid account (balance sheet) and create an accrual schedule to accrue the cost into the correct period.


The following accounting entries are expected:


Invoice posting:


Prepaid expense (Purchase accrual) Debit 10 000 €

Vendor balance Credit 10 000 €


Monthly entry:


Rental SaaS expense Debit 10 000 €/x days in month

Prepaid Expense (Purchase accrual) Credit 10 000 €/x days in month


We finally have a solution to cover that basic requirement. I have never been a big fan of accrual scheme and it did not work with purchase orders. I will show a solution for that in another article. The subscription billing module released by Microsoft brings up a lot of new functionalities which can be used by any industry.


Prerequisites :


Turn on the following features in the Feature management workspace:


- Subscription billing

- Revenue and expense deferrals


We also need to set up a little bit D365 F&O.


  • Set up Deferral template


Go to Subscription billing > revenue and expense deferrals > Setup > Deferral templates


It is very useful to have the option to select Fiscal periods in the Period frequency field. Create as many templates as your company needs.


  • Define default posting profile for Schedule posting

Go to Subscription billing > Revenue and expense deferrals > Setup > Deferral defaults

The recognition account can still be amended at a later stage.

Process flow :


Go to Accounts Payable > Invoices > Invoice journal


Create an Invoice journal

Enter the line details

Select Deferrals

Validate posting set up. You can still modify them later if a mistake is made here.


You can update the recognition account and the scheduling template as per your need


The deferral start date is also amendable.


You can Preview the schedule. D365 F&O has distributed the credit amount based on number of days in that month. The fiscal period is used in my case as I set it up that way. The Gregorian calendar could be applied as well.

No more calculation in Excel, it won't make all Accounting clerks happy I know !


Post vendor invoice and review Deferral schedule


Review the voucher once the invoice journal is posted


Then, go to Subscription billing > Revenue and expense deferrals > Deferral schedules > Active deferrals schedules


Once the vendor invoice is posted, you realize that you made a mistake and selected the wrong schedule template. No worries, you can modify the schedule !

Click Modify schedule


Turn on Schedule from template


Select a new template

Click Preview, review the simulation, then click OK


Same thing could be done for the accrual account or the recognition account. That’s very flexible.


Post month recognition and review


You can follow-up the amount booked in your P&L and what’s remaining

If you want to book the entry in one month, select the schedule line and click Recognize

Select the journal name, then View Preview

Finally click Process

A journal is automatically created and posted.


Select the Journal batch number to see it.

In addition, the recognized amount on the active schedule is updated accordingly.

That's it, you can review on a monthly basis, and an audit trail tracks all actions.


The same kind of feature can be used for purchase orders.

211 views0 comments

Recent Posts

See All

Comments


bottom of page