Adrien, I do not use the business features but it seems from what you have written that something like the following may do what you want.
Create a new liability account named Unbilled Payables (or whatever you like). Replace > Dr. Assets:Current_Assets:Pre-Paid_Expenses:Auto_Insurance > Cr. Liabilities:Accounts_Payable by Dr. Assets:Current_Assets:Pre-Paid_Expenses:Auto_Insurance Cr. Liabilities:Unbilled Payables There is no change in the Balance Sheet net. The entry in Unbilled Payables should be tagged so that an audit trail could be constructed. When the bill arrives, post the bill so that you effect a transfer between the liabilities Dr. Liabilities:Unbilled Payables Cr. Liabilities:Accounts_Payable Again there is no change in the Balance Sheet net. At this point the normal flow of the business features should generate your reminder and, upon payment, zero the liability for the pre-paid insurance. The asset becomes real. Dale On 12/15/2017 02:57 PM, Adrien Monteleone wrote: > Yes, I can explain. And the example of insurance is just that. A pre-paid > expense IS an asset. (in accrual accounting) > > I pay in advance for auto insurance. The policy renews every 6 months. (for > me, this is in December and June) > > Paying in advance is a pre-paid expense. This is an asset. I have not yet > received ‘service’ from the insurance company. > > Here’s what the entry should be twice a year: > > Dr. Assets:Current_Assets:Pre-Paid_Expenses:Auto_Insurance > Cr. Assets:Current_Assets:Cash > > As I receive ‘service’ each month, or ‘use’ the asset, I credit the pre-paid > expense account and debit the actual expense account for one-sixth of the > asset (as this is a 6-month policy): > > Dr. Expenses:Auto:Auto_Insurance > Cr. Assets:Current_Assets:Pre-Paid_Expenses:Auto_Insurance > > The original question was trying to resolve the issue of posting the bill > from the insurer for each renewal and how that affects recognition of the > acquisition of the pre-paid expense asset. > > My current entry from the bill is: > > Dr. Assets:Current_Assets:Pre-Paid_Expenses:Auto_Insurance > Cr. Liabilities:Accounts_Payable > > and then when I pay it: > > Dr. Liabilities:Accounts_Payable > Cr. Assets:Current_Assets:Cash > > Technically, legally, I don’t have this asset until I actually pre-pay. The > generation of a paper bill from the insurer is not an activity that either is > the earning of income on their part, the incurring of an expense on mine, or > even the assumption of a liability on the part of either of us. If I decline > to pay the bill, the policy never goes into effect, I never receive anything > of value and the insurer earns nothing, owes me nothing, and has no claim > against me. (I don’t owe them anything) > > Posting the bill on any date other than the actual payment date creates the > problem of properly recognizing the asset. This is even more problematic if > the bill for renewal is received and posted into GnuCash in the period prior > to the renewal and payment date. (frequently the case - the bill usually > arrives in mid November/May) > > Note, I can’t find any guidance online on posting a ‘bill' for pre-paid > insurance. ALL examples I find state to make the above entry—effective on the > date of payment. I suspect this is because it is a shift in assets that > cannot occur until it actually does. This is not a cash vs. accrual problem. > The very use of the pre-paid expense account is a practice of accrual > accounting and NOT cash basis accounting. (on a cash basis, the entire > premium would be expensed when paid) > > Accrual vs. Cash doesn’t mean "document-dates vs. payment-dates." It means > "activity-dates vs. payment-dates.” > > In fact, I see very little guidance with reference to the receipt of bills or > issuing of invoices. What I see is how to make entries for when the relevant > activity trigger takes place. (an expense is incurred or revenue is earned) > > In the case of a pre-paid expense, (a deferred expense) the activity takes > place in later periods than the payment date. So the expense has to be > accrued as it is incurred. In the case of an accrued expense (the opposite) > the expense is recognized when incurred, and is booked as a liability until > paid. > > It seems the business features only contemplated accrued expenses. (and > conversely on the invoice side, did not consider un-billed work) > > So posting this bill shouldn’t even be a liability, it’s not an accrued > expense, it’s a deferred expense. It should never hit AP but I can’t see > anyway around that the way the system presently works. > > A complication is that the Bills Due Reminder feature only works on posted > bills because that is when you enter the due date.(it can’t calculate > anything without it, unless you have fixed terms, but even with that, unless > you post, the reminder will not be triggered) > > It would be nice to enter the bill when received in GnuCash and have it show > up on the Bills Due Reminder, but that seems impossible in this case. I can > certainly enter the bill when received, but I can’t post it till I pay it or > else my assets will shift too soon. > > I suppose I could bypass the business features all together, but then I don’t > get the benefit of a bill reminder, or an easy to follow history with that > vendor. (manual transactions won’t show up on the vendor report) > > I’ve decided on this approach for now: > > Set a reminder in my OS calendar to enter and post the bill as a manual > transaction when I actually pay it. > > This means I can’t see this transaction on a vendor report and I can’t see my > ‘due dates’ all in one place - GnuCash. > > However, my AP won’t have an erroneous entry and my assets won’t be inflated > in November and May of each year. > > Regards, > Adrien > >> On Dec 15, 2017, at 9:51 AM, Derek Atkins <warl...@mit.edu> wrote: >> >> Adrien, >> >> Adrien Monteleone <adrien.montele...@gmail.com> writes: >> >>> Sorry, allow me to rephrase, when do I acquire the pre-paid expense ASSET? >> >> Can you please explain what you mean by a "pre-paid expense asset"? Is >> it an Expense? Or is it an Asset? >> >> Could you give a concrete example of something that is a "pre-paid >> expense asset"? >> >> Sorry for being dense, but I still don't grok what you're trying to do >> or how this is mapping into a real-world transaction. >> >>> Please remember to CC this list on all your replies. >>> You can do this by using Reply-To-List or Reply-All. > > Sorry, I thought I did. I usually do this by backing-out the personal e-mail > and replace it with the list email when I start each reply. I really wish > Apple Mail would handle ‘reply to list’ properly to save me the trouble. I > stuck with Thunderbird for many years on that point alone but finally made > the switch for integration advantages. My apologies. > >> >> -derek >> >> -- >> Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory >> Member, MIT Student Information Processing Board (SIPB) >> URL: http://web.mit.edu/warlord/ PP-ASEL-IA N1NWH >> warl...@mit.edu PGP key available > > _______________________________________________ > gnucash-user mailing list > gnucash-user@gnucash.org > https://lists.gnucash.org/mailman/listinfo/gnucash-user > ----- > Please remember to CC this list on all your replies. > You can do this by using Reply-To-List or Reply-All. > _______________________________________________ gnucash-user mailing list gnucash-user@gnucash.org https://lists.gnucash.org/mailman/listinfo/gnucash-user ----- Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
