How to Create a Prepayment

Journal

Create a new Deferred "Expense" Journal with preferred options 


Asset Type

Go to Accounting>Config>Asset Type


Create a new asset type named "Deferred Expense" 

Set the Journal to "Deferred Expense"

Asset Account → Prepayment 

Depreciation Entries: Asset Account → Prepayment 

Depreciation Entries: Expense Account → Cost of revenue

Auto-confirm Assets → True

Number of Entries → 12

One entry every → 1 month 


Product 

Create/ open product 

Go to invoicing tab 

Set the asset type to "Deferred Expense"

Set the Expense Account to "Prepayment" 

Create PO

Create PO and select the product you created. 

Make sure that the product is set correctly with the expense account. 

Select the asset type in the PO Line. 

Confirm PO. 

Vendor 

Create a vendor bill and validate the invoice. 

Check the journal entries. 


Now go to the Accounting> Advisor> Assets. 

Review the asset that is created and post entries. 

Logic to post: 

Vendor bill → Creditor Credited and Prepayment Debited 

Posting of the first-month →  Prepayment is credited and COGS is debited