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How do I account for accrued rent?

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Anders Wallenquist
on 11/17/13, 4:45 AM 1,385 views

A lot of invoices have costs who do not apply to the current period, how do I accrue an Invoice?

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michel Guénard

--michel Guénard--
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--michel Guénard--

VP operations & finance Social entrepreneur Certified Public Accountant Past Chief internal auditor

michel Guénard
On 11/18/13, 6:13 AM

Accounting principles state that Revenues and cost must be recorded into the period they belong to; the accounting process which is actionned to do this is called "cut-off"; this is not an OpenErp process as such. a specific cut-off module could be useful (to be developped!; probably using mecanisms similar to the fixed assets depreciation one)

At least such a process is geared on an annual basis for the annual fiscal year. This is why companies make an annual physical inventory of stocks to adjust books with actual physical; they also record assets depreciation and amortization; they also recognize into their books any kind of accruals that were not recorded earlier.

Similarly one may need to apply a proper cut-off for sub-periods (monthly for instance). From an accounting point of view, the accounting entries will be: 1. at the time you receive or create the invoice and book the full amount: debit or credit the partner account and post the counterpart to a balance sheet account (named "deferred costs" or "deferred revenues") 2. at the closing of each period (including the first one) allocate the appropriate amount by debiting or crediting the above account with a counterpart to the Profit and Loss account (sales or expenses)

That is correct, using deffered-accounts moves cost/revenue to balance sheet until its time to view the cost/revenue at profit/loss sheet. Usually you dont have to manually book cost and revenue to "deffered"-accounts, you just fill in start period and how many periods you want to accrue cost (and revenue) to. I have accually tested the account_asset-module for this but have some problems; for example i got the cost for three periods diveded to tre periods plus current month. There is no way to charge a period in the past...

Anders Wallenquist
on 11/21/13, 12:04 PM

Btw is it possible to divide the transaction into several with unique periods, instead of using deffered-accounts and the extra accounting in period end? Reports based on periods whould be correct but I don't know what an external auditor whould say.

Anders Wallenquist
on 11/21/13, 12:08 PM

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Asked: 11/17/13, 4:45 AM
Seen: 1385 times
Last updated: 3/16/15, 8:10 AM