openerp-expert-accounting team mailing list archive

[Alexandre Fayolle <alexandre.fayolle@xxxxxxxxxxxxxx>]

In Frederic's mail, you should read of course "a pro-forma invoice is
not a legal document that you can use in your books."

Alexandre

On 20/11/2013 14:08, Frédéric Clementi wrote:
> @ Eric : 
>  -- That is my problem today. Those modules are great but rely on the
> default AR account which is incorrect in my opinion.
> This is not a technical issue (actually Guewen answered perfectly the
> technical question) but an accounting/SOP issue --
>
> FYI you cannot accuse me to be too technical... I am not a developper
> ! actually I have an account background    :)
>
> Joke appart, to sum up my message below :  do not create a prepayment
> account instead of using the usual AP/AR accounts. 
>
> I used MG comments to explain my point :
>
>
>     Hello
>     Pre-payments transactions differ from cut-off issues!
>
> No. Be careful to accounting terminology. Let clarify what I mean with
> that example found on the web here
> :http://www.accountingcoach.com/blog/prepaid-expense). I rephrased it
> to simply :
>
> *01-dec *: you pay your next 6 months insurance for 6000 $ -> debit
> 'Prepayment account' - credit 'Bank account' for 6000$ (note that
> there are no expense recorded in my books at this stage)
> *
> *
> *31-dec* : as it is the last day of your fiscal year, you want to
> exclude 5 months paid but related to the next fiscal year -> Debit
> 'Insurance expense account' - credit 'Prepayment account' for 1000$
> (*this is a cut-off entry* -> I record an expense of 1000$ on my
> current fiscal year)
>
> *01-jan* : I reverse my cut-off enty -> debit 'Prepayment account' -
> credit 'Insurance expense account' for 1000$
> *
> *
> *01-mar* : imagine that I receive my insurance invoice that day ->
> debit  'Insurance expense account' - credit 'Prepayment account' for 6000$
>  
>
>
>     A prepayment is made at the request of a partner as a necessary
>     condition for him to deliver the service or the product; as such
>     it is recognized in the books as a payment in advance (for an
>     invoice to be received); it is usual to receive a pro-forma
>     invoice (for ecommerce the transaction amount is either sent by
>     email or just stated on a web page (that can be printed offline).
>
>
> I found this stated on some website as well but again be carefull with
> this is partially wrong.
> 1st point - a pro-forma invoice is not a legal document that you
> cannot use in your books. So, the accounting entry to be recorded is a
> basic payment -> debit 'payable account' - credit 'bank account'  (if
> you pay money to a supplier) OR debit  'bank account' - credit
> 'receivable account' (if you receive money from a customer).
>
> 2nd point : if you recevable money from a customer for some goods you
> have delivered and that you have not invoiced yet you do not have to
> use a prepaid account ... you have to use instead the usual receivable
> account.
>
> Conclusion : a prepaid account must be use for cut-off purpose in
> order the fullfill the segregation of period principle when you paid
> something that must must linked to a other fiscal year .....but not to
> record any payment that you receive or you pay before the invoice
> booking like a simple goods delevery.
>
> Hope this clarify my point.
>
> Frederic
>
>
>
>
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-- 
Alexandre Fayolle
Chef de Projet
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