How to handle prepayments

I run a club where members pay subscriptions. Sometimes they pay for a current year and a future year say in December.

The money is in the bank but one payment is for the following year. I have looked at creating a pending deposit.

Can someone please explain the best accounting method to handle this requirement and reflect it correctly in the balance sheet

Many thanks for all the advice being provided it is most welcome and I am most grateful as I do not have an account to ask.

As (almost) always, there are Guides:

Record customer deposits and advances | Manager explains the built-in approach. One problem with this approach is that a sales invoice for a dinner this year will automatically be credited with next year’s subscription balance.

Avoid automatic credit allocations with special accounts | Manager explains a method using special accounts to hold the portion of a receipt destined for next year’s subscriptions. This method requires splitting a receipt into two line items, one for this year’s subscription, which would be posted to the account where you are recording current year subscription income. The other line would be posted to the special account and held for next year.

This is probably how I’d approach the solution, with my own limited accounting knowledge. @Tut posted as I was writing this up, and knows a bit more about Manager, so check his answer first.

If you’re doing your bank reconciliation (or manually entering a transaction) you can mark their payment as ‘Accounts receivable’ for that Customer.

Here’s an example of me creating it via ‘Bank Transactions’ > ‘New Bank Transaction’ > ‘Receive money’. Leave the invoice column empty:

In Manager, it will show up as them having a credit:

Then, when the year’s membership fee is due… issue a sales invoice:

If the person had enough credit to cover the cost, it should be automatically subtracted and it will show the remaining amount owing:

Notice that balance due is zero, because he was $50 ahead and the membership fee was $50. If he was only $30 ahead, the invoice would say that $20 is due.

@ShaneAU has just nicely illustrated the first method I mentioned.

@Gally you have already asked a similar question here Regular payments

The solution there would be similar to here - but with a different control account - Membership fees in advance.

Your conflict with the first method demonstrated above is that the next year’s membership fee credit on a members account could be swallowed up by any other invoicing for other activities.

I have set up a prepayment as above. I have changed the accounting period to allow a a receipt to be posted to memberships in advance in dec 2016. A sales order is created in Jan 2017 with a contra line.

The SO is shown as paid in full and annual subs revenue income has the funds posted.

The thing I cannot understand is that the 2016 receipt date is shown in red and value zero with a negative balance on the BS.

Can you please explain this. Thanks

Where in Manager are you seeing this - can you show a screenshot with description.

Which “above” method did you use. Two were discussed. You never indicated which you adopted.

Your terminology makes your question uncertain. Sales orders have no financial impact and do not pertain in any way to behavior you are describing. Did you mean sales invoices?

And what is the contra line for? A negative line on a sales invoice has the effect of subtracting from the balance due and reducing income.

In 2016 I received Money in the bank as an advance payment!

2016_Bank Receipt|690x53

Here is the detail of the receipt
2016_Bank Receipt Detail|690x243

In 2017 I created a sales invoice

Here is the BS result
It may be correct it just that I doh not understand why it is not zero
2017_BS_BS_Members subs in advance

Thanks and I hope the photos uploaded correctly

Here are the first two photos again

You did write earlier -" I have changed the accounting period"
Your current Summary tab - Set Period should have a “from” date of 01/01/17

Your screenshot with the red date, where is that a drill down from - which tab or account or . . .
If you click on the Summary - BS - MS in Adv blue figure -144, what is displayed ?

@Gally, it may be buried in the earlier parts of this thread, but a quick review didn’t turn it up for me. Do you have a Start Date set under Settings? It looks like you must and the receipt from 2016 is red because it is being ignored because it is earlier than the start date. The only transactions before the start date that Manager picks up are unpaid invoices at the time of adoption of Manager, which are posted to Accounts receivable and Accounts payable.

Other starting balances should be entered as such, but they can’t be entered for custom control accounts because those balances are rolled up from subsidiary ledgers.

I do have a start date, however in this instance I set it for 1st Dec 2016 as there are no other posting in 2016. I received a sum on 9th Dec for this £144 into the BS members advance subs.

At this time it is a liability asset on the BS and hence a negative number. no invoices are available in 2016 for this person and as it is in a control account cannot be cleared.

The money is in the bank in 2016 and the opening balance on 1/1/17 reflects the sum.

A sales invoice issued in 2017 with a charge of £144 to the annual subs account and a contra to members advance subs should in my view clear the BS item to zero.

That is why I cannot understand why its shown now as -£144 I only need to change the start date while I create the sales invoice and post the item so that it can update the control account of that member.

Otherwise I have also tried posting to accounts receivable the other method but do not seem to understand how money in the bank in one year gets posted to the P&L in the next, they are not pending receipts as they are already in the bank, very confusing for me as a non accountant.


@Gally, your postings seem to wander between subjects, so I’m not sure I understand exactly what you’ve done. So I will make several points and ask some questions:

  1. The start date should be the date you began entering all transactions in Manager. You should not be changing it forward and backward to allow entries just to clear a transaction, if that’s what you’ve tried to do. Changing it back just restores the situation and will reintroduce the problem you are trying to clear. So choose a start date to match the day you actually began using Manager to keep your accounting records.

  2. Is your account Membership Subs in Advance a custom control account? If so, post a screen shot of its entry page.

  3. If the aforementioned account is a control account, you cannot set starting balances. And Manager will not pick up transactions that pre-date the start date. It only does that for Accounts receivable and Accounts payable.

  1. Your Summary shows the -144 as a negative number, but because it is in the Less Expenses category, that means it is actually an asset. But you are correct in believing that an advance deposit from a member is a liability, so this was somehow entered incorrectly. Your description of “a contra to members advance subs” is not clear, especially since you conjoined it with mentioning a sales invoice “with a charge…to the annual subs account.” The 2017 sales invoice would have credited the annual subs account. It’s corresponding debit is posted automatically by Manager to Accounts receivable. So if you made some other type of entry for your “contra to members advance subs,” that is probably where the problem is.
  1. See my earlier remark about changing start dates.
  1. Money in the bank is an asset on your balance sheet, irrespective of income or expenses. It appears on the balance sheet and carries forward. Profit and Loss Statement accounts (income and expenses) are completely separate and record new activity in the current year. Such activity may affect the bank balance, but it may also only reflect transfer of debits and credits. That’s the challenge most accounting newcomers have in understanding accrual-basis accounting.

I have deleted the sales invoice but left the advance subs payment bank receipt of 2016 as described above.

Searching for this receipt in the bank transactions shows a receipt as follows.

This receipt posts to the members advance subs BS control account cleared on 31/12/16 and the money is in the the bank account making the bank account £144 at year end than it should be. So the membership subs account should be a £144 liability. It shows zero. I have a start date or 1/1/17 for my accounting year.

On the detail posting document It shows as 144 but when I view it in the search summary line its shows zero and a red date when in the edit/view line summary with a status cleared

So it is something to do with start dates and year end.

If I now create a 2017 invoice for Bill muir with only one line item to the revenue account it shows unpaid.
If I add a contra line for -144 to the subs membership control account for bill muir the invoice shows fully paid which is what it should be and the postings to the membership subs account should balance to zero.

So I feel it is the way Manager is dealing with the accounts start date at year end. So maybe this approach is not the right way.

Should I try posting the receipt in 2016 to accounts receivable and the 2017 sales invoice with two lines as above but the second as a contra to accounts receivable?


No, the Start Date relates to the starting date in which you “started” using Manager - it DOESN"T relate to your financial year, that is managed by the SET PERIOD on the Summary tab.

To repeat what was previously posted: “The start date should be the date you began entering all transactions in Manager. You should not be changing it forward and backward”

Furthermore, you only need to use the START DATE feature, if you are going to putting in Opening Balances for the Balance Sheet, the Closing Balances from a previous accounting system Or in other words, if you are commencing a brand new business, then you “don’t” need to set a Start Date.

In your case, the “money in the bank in one year” is stored on the balance sheet for that year via the Subs in Adv account, then the Sales Invoice in the next year transfers that stored value - “posted to the P&L in the next”

So the question now arises - are you putting in Starting Balances (previous accounting system’s closing balances), if yes, at what date are these are these being entered ?

All sorted, it was all a question of start dates, period dates and balances entered. Everything is fine I now have a beautiful set of accounts which I now understand and can explain to my members.

Thank you all for your patience, understanding and time taken to help me.