We purchase some services from a supplier.actually that is prepaid expense(asset).How to add this purchase details in erpnext ?
We can not add asset account in purchase invoice because it only showing expense account.
In peach tree we did the same entry in purchase invoice and account as
prepaid expense and supplier.how can i do the same in erpnext ?
Create Advance Payment entry.
Have Purchase Invoice created based on recurring bases.
Knock-off Purchase Invoice against Payment Entry via Payment Reconciliation Tool.
Hope this helps.
I have the same problem. Kindly provide step by step solution usingthe options Available. I am a qualified accountant and familiar with other programs yet struggling with this.
Thank you. Will try it.
It look complicated.
Can’t you just make a payment. And then perform a matching (recon). All that’s not matched is automatically an asset or liability?
I think conceptually that;s what it does. It is given different names like depreciation, advance payments, prepaid expenses… 
That is how fortune 500 companies do it as well. Standard process.
Deepak
But while purchasing we will not pay.payment entry will be done after some time
Actually i need the transaction like this
Account Debit Credit
Supplier(Creditors) 100
Prepaid Expense 100
How can i make this entry ?
This can not done in purchase invoice,because in purchase invoice we can not asset account,Prepaid expense is an asset account
Account Debit Credit
Prepaid Expense 8
Expense Account 8
On each month prepaid account will credited and expense account will be
credited.This is also we can not do purchase invoice(For recurring).Prepaid expense not accessible from purchase invoice
Payment we will not do when purchase.
Please let me know how to handle this.
Would you be able to provide a business example? Thanks
In ministry of labor we have to pay a fixed amount for one year for each employee,any work related to ministry of labor will be done by a supplier who provide this type of service
for example we will pay 1000 rupees for an employee as one year deposit,
We will purchase this service from a supplier, and amount 1000 will be a prepaid expense because the amount is for one year
in peachtree we are doing this transaction like this
on purchase invoice(payment will do later)
Account Debit Credit
Supplier 1000
Prepaid Expense 1000
on expense entry in each month
Account Debit Credit
Prepaid Expense 83
Expense Account 83
83 expense amount for one month(83*12=1000)
How i can do this entry in erpnext.because purchase invoice is not allowed to select asset account(prepaid expense).both transaction include this asset account,so i can not use purchase invoice module
Sorry Renju, i tried to see if there are ways it can be automated for example by creating recurring invoice. Doesnt seem there is an elegant solution for it . But since you are working for Ministry of Labor possible to get like 1-2 Cr INR and fund the foundation? Just joking. Or atleast get MoL to become a *Titanium Sponsor for ERPNext? *
Ministry of Labor was just an example
would you suggest any alternative way to enter above tranaction
If this pre payment is to an employee maybe this will help:
This thread is irrelevant now. I keep getting these threads that no longer serve any purpose.
@Botanium I agree. This seems to be an issue that I am not understanding. I don’t even see a prepaid asset account set up. And per the system instructions, it seems just wrong:
"2.2 Purchase Invoice
On creation of Purchase Invoice for the Deferred Expense Item, instead of posting in the Expense Account, Deferred Expense account (Asset account) is Credited by the purchase amount. Let’s consider a simple example of an Internet subscription here"
Why would we be crediting a deferred expense account ON PURCHASE? Maybe a portion of it that is used in the current month, but this is not accurate unless the system is doing something totally different here. ON PURCHASE we should be doing the basic entry I show below, right?
This is such a basic simple entry that should not have any complexities at all. Here is my example:
I have insurance that covers 6 months from Aug - Feb for a total 1000 (easy rounding). My accounting knowledge says to simply make the following entries:
(dr)Prepaid Insurance 1000
(cr)CASH 1000
For each month that that insurance is used, we just make very simple entries until it is used up. For example, each month would be:
(dr)Insurance Expense 166.67 (1000/6)
(cr)Prepaid Insurance 166.67
The idea is that you are using up an asset (prepaid insurance) and using it creates a cost (insurance expense). For the life of me, I cannot figure out why we need to create advance payment entries and do all of these work arounds for something that seems to be fairly straightforward and simplistic.
I am very tempted to just create Journal Entries for these and set a reminder to amortize them each month. This seems silly as an ERP should make a simple task like this even simpler…
I know this is an old thread, but someone has to have a much better way of handling these expenses at this point?