Amortization in CentreBillAt invoice run time, all prepayments for services are automatically amortized and the corresponding
GL transactions added to the GL interface file. There is no risk of accruing all income for a service which extends over several accounting periods into the first billing period.
This means that only that
portion of the prepayment which is relevant to the account period in question is accrued to income, the remainder remains as a liability on the balance sheet as Income in Advance, or Unearned Income.
The report below shows for each customer:
- Invoice Number
– for each service to be amortized against the customer, the invoice which was raised which included the full amount for the service invoiced in advance
- Charge ID
– the id of the charge that was posted to the particular invoice
- Service ID
– the id of the instance of the service which has been allocated to the customer
- Service Description
– the description of the service
- Charge Date
– the date on which the charge for the full amount was raised
- Original Unearned Income
– the full amount of the charge for the full period which is to be amortized
- Cumulative Earned Income
– the amount of the original charge which has accrued to income over the period
- Current Unearned Income
– the total amount which still has to be amortized. This is a liability and will show as such on the provider's balance shee.
Large international corporations are known to have run foul of the authorities due to failure to amortize income for services yet to be delivered.
This is a powerful feature of CenterBill and is typically only found in larger and more expensive billing systems.
Example of Amortization GL Transactions Interface into an Existing Accounting System
The table below shows the nature of the transactions for a service with the following characetristics:
- Cost of service - $132.00 which includes 10% ($13.20) sales tax
- Subsription period - 12 months
- Payments to be amortized per month - $10.00
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