How can I treat expenses in Simple Fund 360 if they are prepaid and need to be amortised over more than one year (for example, five years)?
A prepaid expense is expenditure you incur under an agreement for something to be done (in whole or in part) in a later income year. The prepayment rules alter the timing of deductions for certain prepaid expenses that would ordinarily be immediately deductible in full in the year in which they are incurred. Generally, a prepaid expense is deductible over the ‘eligible service period’. The ‘eligible service period’ cannot exceed 10 years.
Borrowing Expenses such as loan establishment fees, title search fees and costs of preparing and filing mortgage documents can be deducted. If the expenses total $100 or less, they can be deducted in the year of occurrence to the relevant expense account (for example account 42120 - Title Fees); alternatively they are deducted over five years or the term of the loan. For further information, refer to the ATO website.
For other expenses such as ASIC Fees or subscriptions may be prepaid and need to be amortised over a number of years.
To account for these expenses in Simple Fund 360;
- Use the existing 66000 Prepaid Expenses account in the Chart of Accounts or create a Custom Asset Account e.g. Prepaid ASIC Fees to record the borrowing expenses;
- Create a expense account to amortise the Prepaid Expenses if one does not already exist;
- Record expenses over the deductible period.
Record the payment to Prepaid Expenses Asset Account
Use the Transaction Matching or Smart Matching screen, to code the transactions to account 66000 Prepaid Expenses (or another asset account of you liking).
Manual Data Entry
|From the Main Toolbar, go to Accounting.|
|Select Transaction list|
- From the Transaction List screen, select New Transaction. From the drop down list, select Bank Statement.
- Input the date of the transaction and a reference number (Simple Fund 360 will automatically produce a reference number, but it is editable). You can include a description of the purchase in the Description box.
- Under the Account heading, select the bank account from the Select an account box. Click on the next Select an account box. Begin typing and select
account 66000 Prepaid Expenses.
Input the amount of the prepaid expenses. Simple Fund 360 will post a corresponding entry to the bank account.
After you have entered all information for the transaction, select Post to add the transaction and to view the Transaction List screen, or select Post & Add Another to add the transaction to the Transaction List, but remain on the Bank Statement screen.
Amortise the expense over the deductible period
Manual Journals can be recorded through the Transaction List.
- Input the Date of the transaction and a Reference number. You can include a description of the transaction in the Description box.
- Under the Account heading, from the Select an account box, search for the account.
- Input the expense amount under the Debit column.
Next, search for the Prepaid Expense Account 66000 from the Select an account box and enter the depreciation amount under the Credit column.
After you have entered all information for the transaction, select Post to add the transaction and return to the Transaction List screen or select Post & Add Another to add the transaction to the Transaction List.