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How to Defer Expenses

Certain expense are incurred in one period that are to be recognized over multiple periods, expenses like prepaid insurance, membership etc. To distribute these expenses on the involved accounting periods, you can set up a deferral template for the item, resource, or G/L account that the expense will be posted for. When set up NAV allows you to post the related purchase document, the expense is deferred to the involved accounting periods, according to a deferral schedule that is governed by settings in the deferral template and the posting date.

There are cases where you will need to incur certain expense, such as prepaid insurance or membership, over multiple periods. You can set up a deferral template for the item, resource, or G/L account where the expense will be posted, to distribute these expenses over the involved accounting periods. When set up, NAV allows you to post the related purchase document. The expense is then deferred to the involved accounting periods according to a deferral schedule that is governed by settings in the deferral template and the posting date.

In this article we will cover following topics:

  • Setting up a G/L account to which deferred expenses are posted.
  • Setting up a deferral template that governs the schedule by which amounts are deferred to specified accounting periods when a purchase invoice is posted.
  • Assigning a deferral template to an item for which expenses must be deferred to the accounting periods when the item to be invoiced was actually purchased.
  • Changing a deferral schedule from a purchase invoice.

Setting Up a G/L Account for Deferred Expenses

  1. In the Search field, enter Chart of Accounts, and then choose the page from the drop-down list.
    The Chart of Accounts page displays.
  2. From the Ribbon, click New.
  3. Create a new G/L account of type Balance Sheet that deferred expenses are posted to. Name the account, for example, Prepaid Expenses.
    Note: You can skip this step if a GL account is already created.

Setting Up Deferral Templates

  1. In the Search field, type Deferral Templates and then select the page from the drop-down list.
    The Deferral Template page displays.  
  2. From the Ribbon, click New.
  3. Complete the fields as described in the following table.
Field Description
Deferral Code Identify the deferral template.
Description Describe the deferral template.
Deferral Account Specify the G/L account that the deferred expenses are posted to.
Deferral % Specify how much of the total amount will be deferred.
Calc. Method Specify how the Amount field for each period in the Deferral Schedule page is calculated. You can choose between the following options:
  • Straight-Line: the periodic deferral amounts are calculated according to the number of periods, distributed according to the period length.
  • Equal Per Period: The periodic deferral amounts are calculated according to the number of periods, distributed evenly on periods.
  • Days Per Period: The periodic deferral amounts are calculated according to the number of days in the period.
  • User-Defined: The periodic deferral amounts are not calculated. You must manually fill the Amount field for each period in the Deferral Schedule page.  For more information, see To change a deferral schedule from a purchase invoice.
Start Date Specify when to start calculating deferral amounts. You can choose between the following options:
  • Posting Date: The start date used when calculating deferral amounts id the posting date of the invoice.
  • Beginning of Period: The start date used when calculating deferral amounts is the first day of the accounting period in which the posting date falls.
  • End of Period: The start date used when calculating deferral amounts is the last day of the accounting period in which the posting date falls.
  • Beginning of Next Period:The start date used when calculating deferral amounts is the first day of the accounting period that follows the accounting period in which the posting date falls.
No. of Periods Specify how many accounting periods the total amounts will be deferred to.
Period Desc. Specify a description that will be shown on entries for the deferral posting. You can enter the following placeholder codes for typical values, which will be inserted automatically when the period description is displayed.
  • %1 = The day number of the period posting date
  • %2 = The week number of the period posting date
  • %3 = The month number of the period posting date
  • %4 = The month name of the period posting date
  • %5 = The accounting period name of the period posting date
  • %6 = The fiscal year of the period posting date

Note: For example the posting date is 02/06/2016. If you enter Expenses deferral for %4 %6, then the description displayed will be Expenses deferral for February 2016.

     DefExp002.png

Assigning Deferral Templates to Items

  1. In the Search field, type Chart of Accounts and then select the page from the drop-down list.
    The Chart of Accounts page displays.

    chart_of_accounts.png
  2. Open the card for the GL Account / item for which expenses must be deferred to the accounting periods when the item is paid/purchased.
  3. On the Posting FastTab, in the Default Deferral Template field, select the deferral template.
  4. Click OK.

Changing Deferral Schedules from Purchase Invoices

  1. In the Search field, type Purchase Invoices and then select the page from the drop-down list.
    The Purchase Invoices page displays.
  2. Create a purchase invoice for a purchased item that has a deferral template assigned.
    Notice that as soon as you enter the G/L account (or Item or Resource) on the invoice line, Deferral Code field is filled with the code of the assigned deferral template.
  3. On the Lines FastTab, choose Line, and then choose Deferral Schedule.

    DefExp003.png
  4. In the Deferral Schedule page, change settings on the header or values on the lines, for example to defer the amount to an additional accounting period.
  5. From the Ribbon, choose Calculate Schedule.
  6. Click OK.
    The deferral schedule is updated for the purchase invoice. The related deferral template is unchanged.

Previewing how Deferred Expenses Post to the General Ledger

  1. In the Search field, type Purchase Invoice and select the page from the drop-down list.
    The Purchase Invoice page displays.
  2. From the Ribbon, click the Actions tab and then click Preview Posting.
    The Preview page displays.

    DefExp004.png
  3. In the Posting Preview window, select G/L Entry, and then choose Show Related Entries.

 

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