Prepayment Question

Pinkjo
Pinkjo Registered Posts: 88 Regular contributor ⭐
in General accounting discussion
Hi guys, I have a question regarding prepayments. I'm hoping my thoughts are right, and you lovely lot are going to agree with me :001_smile: Hee goes....

I have a spreadsheet set up for my prepayments, currently aboout 40 entries and I do a journal monthly. These are split between 3 divisions, so for example I pay the £600 advertising bill in June, this covers Jul/Aug/Sep for all 3 divisions. When I pay the bill I post it to prepayments, then monthly I would do a journal

DR Advertising £66.66 Division 1
DR Advertising £66.67 Division 2
DR Advertising £66.67 Division 3
CR Prepayments £200.00

Now, 2 of our divisions closed down in August (say Division 2 and 3), would I post the whole £200 to Division 1 for September?

Thanks for your input.

Comments

  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
    Pinkjo wrote: »

    Now, 2 of our divisions closed down in August (say Division 2 and 3), would I post the whole £200 to Division 1 for September?
    Sounds about right to me.
    The point of prepayments and accruals is to give a true and fair view and put the income/expenditure in the right place at the right time and your treatment sounds fair to me :)
  • Pinkjo
    Pinkjo Registered Posts: 88 Regular contributor ⭐
    Thanks faerie9 :thumbup1:

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