About Prepaid Expense Amortization
Prepaid Expense Amortization (PEA) is a Sage Intacct module that automates the amortization of up-front expenses such as rent, tax, insurance, or licenses. With PEA, you can streamline your close process each month:
- Increase accuracy and save time by recognizing prepaid assets directly from AP purchase invoices.
- Shorten your close time by automatically generating journal entries for expense amortization.
- Ensure proper period cut-off by accounting for expenses in the correct periods.
About PEA
With the PEA module, you set up prepaid expense classes which define how to amortize an expense and over how many periods.
Prepaid expense schedules can be created manually or directly from your AP purchase invoices or PO purchase invoices, and work in coordination with prepaid expense classes to generate the individual prepaid expense schedule entries. These entries are the amortized transactions that you review and post to your prepaid expense journal from month to month.
Example
Say you pay rent for a year for £60,000, but you need your books to reflect that £60,000 over the course of the year as the rental contract is fulfilled. PEA takes the initial expense (whether an AP purchase invoice, PO purchase invoice, or manual entry) and tags it with a prepaid expense class that defines how to amortize the expense and over how many periods. Then, PEA creates a prepaid expense schedule for that transaction which you review and start to generate the schedule entries. From month to month, you review and post these schedule entries against the GL which credits the prepaid account and debits the expense account.
Learn more about the PEA workflow.
Application integrations
PEA integrates with Accounts Payable and Purchasing to make entering and tracking your prepaid expense amortization easier. As such, AP purchase invoices and PO purchase invoices are the primary sources of PEA transactions, though you can enter manual entries from other sources like GL entries or even manually created prepaid expense schedules.
After PEA is set up in your company, you'll see four new fields on your AP purchase invoices in the details section of the entries portion. To track a prepaid expense through an AP purchase invoice, simply enter your AP purchase invoice information as usual, then also include the Prepaid Expense Schedule Name, set the Expense Amortization Start Date, and choose the appropriate Prepaid Expense Class. Once you post your AP purchase invoice, a prepaid expense schedule associated with the transaction automatically generates, which you review and start to generate your amortized prepaid expense schedule entries.
The Prepaid Expense Schedules field automatically populates after you post the AP purchase invoice and generate the associated prepaid expense schedule.
With some additional configuration, PEA integrates with PO purchase invoices. Currently, other Purchasing transactions are not supported by the PEA module.
Once set up, you'll see three new fields on your PO purchase invoices in the details section of the entries portion. To track a prepaid expense through a PO purchase invoice, simply enter your PO purchase invoice information as usual, then also include the Prepaid Expense Schedule Name, set the Expense Amortization Start Date, and choose the appropriate Prepaid Expense Class. Once you post your PO purchase invoice, a prepaid expense schedule associated with the transaction automatically generates, which you review and start to generate your amortized prepaid expense schedule entries.
For more information
If you're interested in adding Prepaid Expense Amortization to your Intacct company, contact your Intacct account representative.
