Splitting prepaid invoices across the year-end, how do I book it?
Prepaid costs across a financial year-end should be split via accruals. Otherwise you over-deduct in year 1 and overstate profit in year 2.
Try this first
- 1Book the full invoice on the usual cost account and move the portion falling in next year to 'prepaid expenses'.
- 2Calculate the split pro rata, for example an annual insurance from September 1 to August 31 splits 4/12 in year 1 and 8/12 in year 2.
- 3On January 1 of the next year reverse the accrual back to the cost account, automate with a reversal entry.
- 4Do this for all annual contracts above a threshold you set yourself, in our experience 1,000 EUR works fine.
- 5Document the split for your accountant, a memo per item saves questions at year-end.
When to bring us in
Many annual contracts or variable terms per vendor, we can set up a recurring booking scheme.
See also
- Switching from Exact Online to Yuki, open items and history do not matchPackage migrations stumble on ledger mapping and open AR/AP. Without a mapping table you lose context.
- Twinfield to Exact, dimensions and cost centres go missingTwinfield uses dimensions, Exact uses cost centres and projects. The mapping is not one-to-one.
- Accountant asks for RGS mapping, your ledger does not follow RGSRGS is the Dutch standard chart that SBR filings and accountant software expect. Without mapping, every year-end is manual.
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