Setting aside funds for future bill

I’m no expert at all in finance, so please excuse any terminology errors or horrendous misuse of this wonderful package !

I run a not-for-profit Community Cinema. Every film we put on I incur a liability for a music license and I pay some months in arrears. I currently handle this by creating a cash account “PRS For Music”, and then creating an expenditure line each time with a separate account code “Licenses - PRS License” and with a tracking code indicating the show (e.g. “Cinderella”). The cash account obviously builds up a negative balance. But this approach means the cost shows up on the Income Expense report for the show (tracking code) thus allowing me to see profit/loss per show. All OK so far.

I’m now at the stage where I need to pay the bill. I can simply transfer the outstanding balance from our main bank account into the “PRS For Music” account - and all is OK. However, what I really want to do is to print out the line item report - much like a purchase order, giving the date of each transaction to present along with the cheque to show which films/dates I’m paying for.

Am I approaching this in the best way ? Is there a better way I can do this ?

Many thanks.

You are on the right path as far as structure but you aren’t using the features quite right.

Instead of the Cash Account - PRS for Music - you should be creating a Supplier, in the name of who you pay, Lets say “PRS For Music” then you would create a monthly Purchase Invoice where you would enter the Films screened for the month by adding an expenditure line and tracking code as you are doing currently by using edit.

So your expectations of “the cost shows up on the Income Expense report for the show (tracking code) thus allowing me to see profit/loss per show” won’t change, but the payment documentation which you are now seeking will automatically fall into place. To pay the Invoice you would Spend Money.

Create the Supplier

Create the monthly Purchase Invoice and EDIT to add each screening

When you come to Pay - VIEW the invoice and Print

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Excellent. Precisely what I needed, and well explained. Thank you very much.

Brucanna posted a solution, but from an accounting point of view I doubt if it is the correct solution.

When you show the film, the liability to pay for showing incurs.

You should create a journal-entry: (you create an accrual)

Debit: (P&LExpense) PRS for Music 100
Credit (Balance Liability) PRS for Music 100

When you actually pay the amount due you can make the journal entry:

Debit (Balance Liability) PRS for Music 100
Credit (Balance Cash) Prs for Music 100

In case you receive a purchase invoice for the amount due, you can enter the purchase invoice and post it against the Liability account in your balance. The purchase invoice then replaces the accrued liability. When you pay the purchase invoice, your bankaccount will be credited and the Creditors-account will be debited.

When the Supplier doesn’t know that a purchase/service has occurred - such as when a film is screened and the supplier is unaware of the screening taking place - then you can have what is called a “Recipient created Purchase Invoice”. The user creates this Purchase Invoice on behalf of the Supplier, as they have an obligation to the Supplier which needs to be paid.

While the basis of your first Journal is correct, it creates the recognition to pay but not the obligation to pay the Supplier. - where the Recipient created Purchase Invoice does, as the Supplier will never be sending a Purchase Invoice - as they are unaware of the sale,

Recipient created Purchase Invoices are widely used in the Media industry between Publishers, Distributors and re-sellers. Publishers (say magazines) never know their sales until the Distributors knows the sales from the re-sellers (newsagents) - in effect - reverse Purchase invoicing.