Hi,

I have spent the best part of the last hour going through month by month all the forum articles to see if someone had asked a similar question. The closest I came to my question was someone asked about Payment on Account but I am not 100% sure I still get the correct way to record the following payment.

The issue is because it is our Financial Year End on August 31 and if the annual payment could have been made on September 1 then I suspect that it wouldn’t have really mattered as we only do annual accounts and I am not that concerned about seeing the value of the asset decrease each month (If Insurance is seen as an asset).

Getting to the situation - Our renewal date for our Motor Insurance is August 31and as the payment needed to be made before this date I have made it today. As the vehicle is a minibus it is a large expense (£3000+) so this is why I think there is an issue as I have paid for it in this financial year but, apart from 1 day, the expense is totally for the next financial year.

I am not an accounts/book-keeping expert but I don’t think that it would be correct to just have it as an expense in the P&L for this year and not have some sort of record that it is for next year.

Can you please offer some advice on how I should record it in Solar Accounts?

I probably should also have a word with my accountant to see what he thinks.

Thanks as always,
Kim.

Hi Kim,

Your intuition is spot-on. Your motor insurance is not an expense in the current year because you only receive the 'benefit' from next financial year. To hande this:
1. Create a new account called 'Prepaid Insurance'. The account type should be 'Asset'
2. When you pay the insurance company in August, create a Money Paid Out transaction allocated to the Prepaid Insurance account (instead of an expense account).
3. Next financial year record a General Transaction from the Prepaid Insurance account to the Motor Expenses account.

I hope this makes sense - please let me know if you need more information. Also, I recommend you check this with your accountant as he/she may want you to do things a little differently.

Cheers,

Of course when you write it like that it seems to be so simple :)
I was trying to get my head around something similar so now it does make sense to me. I will also check with my Accountant.

Thanks very much,
Kim.