Overview

Deferred accounting helps manage advance payments and prepaid expenses. iVendNext automates this process, making it easier to track deferred revenue and expenses. To use it effectively, proper setup is key. This article walks you through the configuration steps to keep your records accurate and compliant.

What is Deferred Accounting?

Deferred accounting refers to the process of recognizing revenue or expenses over time rather than at the point of payment. This is particularly important for businesses that receive payments in advance (deferred revenue) or pay for services upfront (deferred expense). Properly configuring deferred accounting ensures that revenue and expenses are recognized in the correct accounting periods, providing a more accurate picture of your financial health.

Why Configure Deferred Accounting in iVendNext?

1. Automation:
   iVendNext automates the creation of deferred accounting entries, reducing the need for manual calculations and minimizing the risk of errors.

2. Flexibility:
   iVendNext offers flexible booking options, allowing you to choose between booking deferred entries based on days or months.

3. Compliance:
   Proper configuration ensures compliance with accounting standards such as GAAP and IFRS.

4. Efficiency:
   Automated journal entries and reporting save time and streamline your accounting processes.

Steps to Configure Deferred Accounting in iVendNext

Before you start using deferred accounting in iVendNext, you need to configure the settings to suit your business needs. Here’s a step-by-step guide to configuring deferred accounting:

1. Accessing Deferred Accounting Settings

To configure deferred accounting, navigate to the Accounts Settings in iVendNext:

1. Go to Home > Accounting > Accounting Masters > Accounts Settings.

2. Look for the Deferred Accounting section.

2. Key Settings for Deferred Accounting

iVendNext provides several settings that allow you to control how deferred accounting entries are processed. Here are the key settings you need to configure:

2.1 Automatically Process Deferred Accounting Entry

• Default Setting: Enabled

• What it Does: When enabled, iVendNext automatically processes deferred accounting entries. If disabled, you’ll need to process deferred entries manually using the Process Deferred Accounting feature.

• When to Disable: Disable this setting if you prefer to review and approve deferred entries manually.

2.2 Book Deferred Entries Based On

• Options: Days or Months

• Default Setting: Days

• What it Does: This setting determines how deferred revenue or expense is allocated over time.

• Days: The deferred amount is allocated based on the number of days in each month. For example, if you have a deferred revenue of $12,000 over 12 months, $986.30 will be booked for a 30-day month and $1,019.17 for a 31-day month.

• Months: The deferred amount is allocated evenly each month, regardless of the number of days. For example, $1,000 will be booked each month for a $12,000 deferred revenue over 12 months.

• When to Use: Use Days for more accurate allocation or Months for simplicity.

2.3 Book Deferred Entries Via Journal Entry

• Default Setting: Disabled

• What it Does: By default, deferred entries are posted directly to the ledger. Enabling this option allows you to book deferred entries via journal entries.

• When to Enable: Enable this option if you prefer to review and approve journal entries before posting.

2.4 Submit Journal Entries

• Default Setting: Disabled

• What it Does: If deferred entries are booked via journal entries, this setting determines whether journal entries are automatically submitted or kept in draft mode for manual review.

• When to Enable: Enable this option to automatically submit journal entries without manual intervention.

3. Configuring Deferred Revenue and Expense in the Item Master

Once the deferred accounting settings are configured, you need to set up deferred revenue or expense for specific items in the Item Master.

3.1 Configuring Deferred Revenue

1. Go to the Item Master and select the item for which you want to enable deferred revenue.

2. Under the Deferred Revenue section, check the Enable Deferred Revenue box.

3. Select a Deferred Revenue Account (preferably a liability account).

4. Specify the number of months over which the revenue should be deferred.

3.2 Configuring Deferred Expense

1. Go to the Item Master and select the item for which you want to enable deferred expense.

2. Under the Deferred Expense section, check the Enable Deferred Expense box.

3. Select a Deferred Expense Account (preferably an asset account).

4. Specify the number of months over which the expense should be deferred.

4. Creating Deferred Accounting Entries

After configuring the settings and enabling deferred revenue or expense for specific items, iVendNext will automatically create deferred accounting entries based on your invoices.

4.1 Deferred Revenue Entries

• When you create a Sales Invoice for a deferred revenue item, iVendNext will credit the Deferred Revenue Account instead of the income account.

• At the end of each month, iVendNext will create journal entries to debit the deferred revenue account and credit the income account based on the service period.

4.2 Deferred Expense Entries

• When you create a Purchase Invoice for a deferred expense item, iVendNext will credit the Deferred Expense Account instead of the expense account.

• At the end of each month, iVendNext will create journal entries to debit the expense account and credit the deferred expense account based on the service period.

5. Reviewing Deferred Accounting Entries

iVendNext provides a Deferred Revenue/Expense Report that allows you to review and track deferred accounting entries. This report shows the actual and expected postings for deferred items at both the item and invoice levels.

Important Points to Remember

Some of the key points to remember are:

1. Automatic vs. Manual Processing:
   Decide whether you want to process deferred entries automatically or manually based on your business needs.

2. Booking Based on Days or Months:
   Choose the booking method that best suits your accounting practices.

3. Journal Entry Options:
   If you prefer more control over deferred entries, consider booking them via journal entries and enabling automatic submission.

4. Regularly Review Reports:
   Use the Deferred Revenue/Expense Report to ensure that deferred entries are being processed correctly.