Blog Post – Useful Navigation for creating Prepaid Entries in SAP BYD Finance.

Hello community,

I would like to share with you Useful Navigation for creating Prepaid Entries in SAP BYD Finance.

This article aims to give a collection of all the useful navigation which SAP Byd finance has.

if any step is missing in this article , kindly comment so that it will be useful for all community users.

Overview

Prepaid expenses are expenses that you have paid in advance and posted in the fiscal year/period to be closed but that, for accounting purposes, you need to assign in part or entirely to the new fiscal year/period because they represent future benefits.

During initial transaction, instead of recognizing the expense, the expense amount will be recognized as an asset (of type “Other Asset”). So, the expense recognition is deferred. There are two follow-up options for recognizing these prepaid expenses:

• Manually by creating a Journal Entry Voucher in each accounting period.
• Setting up a Recurring Journal Entry Voucher for automatic postings in each accounting period.

Deferring of Expense

When creating the purchase order, in “Account Assignment” tab, the following changes are to be observed:

 Account Assignment Type: This would be “ACC – General Ledger Account only”.

 G/L Account: You would select a prepaid expenses GL (of type OASSET – Other Assets).

If the transaction is a direct manual supplier invoice, in the “Cost Distribution” tab, similar changes are required:

 Account Assignment Type: This would be “ACC – General Ledger Account only”.

 G/L Account: You would select a other expenses GL (of type OASSET – Other Assets).

The accounting entry for such prepaid expense invoice would be as follows (GST input is not availed):

1. Recognition by Manual Journal Entry Voucher

Go to “General Ledger > New Journal Entry Voucher” work center task.

Provide the following details:

1. Credit G/L Account: This will be the prepaid expense GL account.
2. Credit Amount: The expense amount to be recognized for this period. In our example, 5900/12 = 491.66.
3. Debit G/L Account: This will be the actual expense GL account.
4. Debit Amount: Equivalent to the credit amount, the expense amount to be recognized for this period.

Provide the “Profit Center” for OASSET GL Account (Prepaid Expenses) and “Cost Center” for COSEXP GL Account (Expenses).

1. Select the “Posting Date”.
2. Click on “Simulate” to check the resulting accounting entry.
   
   Review the simulated journal entry, click on “Back”.
   

Click on “Post”.

The journal entry will be posted.

1. Recognition by Recurring Journal Entry Voucher

Go to “General Ledger > Journal Entries > Recurring Journal Entry Vouchers” work center view.

Click on “New > Recurring Journal Entry Voucher”.

Select a suitable “Recurring Journal Entry Voucher Type”. This is used for categorizing/grouping the recurring journal entry vouchers. Provide a relevant “Header Text”, this will be used as journal entry text.

Click on “Add Row” twice and provide following details:

1. Credit G/L Account: This will be the prepaid expense GL account.
2. Credit Amount: The expense amount to be recognized per period. In our example, 5900/12 = 491.66.
3. Debit G/L Account: This will be the actual expense GL account.
4. Debit Amount: Equivalent to the credit amount, the expense amount to be recognized for this period.

Provide the “Profit Center” for OASSET GL Account (Prepaid Expenses) and “Cost Center” for COSEXP GL Account (Expenses).

Click on “Next”.

Select “Recurrence Pattern” and input the following details:

1. Start Date: Usually the posting date of the prepaid expense supplier invoice.
2. End: Select “After a number of occurrences” option.
3. End After: Enter the number of months of Amortization period. Here 13 periods because the prepaid

expense is incurred in the mid of month, so amortization for 1 year will be posted in 13 journal vouchers.

1. Recurrence: Select “Monthly” option.
2. Every: Enter “1”
3. Day of Month: This will be the posting date of the expense recognition.

Click on “Next”.

Click on “Add Row” and enter following details:

1. Source Document Type: Select “Supplier Invoice”.
2. Source Document ID: Select the supplier invoice number for the prepaid expense.

This will help us keep track of how much is amortized and how much is still pending.

Click on “Next”.

Review the start and end dates in the “Recurrence” field. Click on “Finish”.

Click on “Edit Recurring Journal Entry Voucher”.

Go to the “List of Journal Entry Vouchers” tab. Select the first occurrence and click on “Edit”.

Change the amortization amount for this first period. In below example, since invoice posting date is 21-June, 10 days of amortization amount is entered.

Select the last occurrence and click on “Edit”.

Change the amortization amount for this last period. In below example, since invoice posting date is 21-June, 20 days of amortization amount is entered.

Go to “General” tab and check that the amortization amount is matching with our prepaid expense amount.

You can check the prepaid expense amount by going to “Balances” tab.

Click on “Save”.

Finally, click on “Actions > Post”.

Provide end date of the first period and click on “OK”.

You can always check balance amount pending for amortization from “Balances” tab.

By following these steps you can easily create Prepaid Entries which helps in recording financial transaction of your organization. It helps in maintaining the resource data properly.

If you find the blog post useful ,kindly like ,share and comment. Any suggestions are welcomed.

Hope you found this helpful!

CA Chandresh Jain