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Year End Adjustment for Prepaid AP

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I need some help with how to do the accounting for the following.

The facts:

  • I received an invoice in 2021 with a 2021 due date
  • I did not pay the invoice in 2021 (aka I am late on the payment)
  • The invoice is for services to be performed in 2022

Should I book the invoice in 2021 (as I was obliged to pay it but didn't, so I would have a "prepayment" and a "accounts payable" balance then) or do not book it (since it is related to 2022 and I did not pay it)?

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RLI
By lionofludesch
18th Jan 2022 10:17

Are you on cash accounting or proper accounting ?

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By teryseck
18th Jan 2022 11:45

Accrual accounting

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Replying to teryseck:
RLI
By lionofludesch
18th Jan 2022 11:57

What you should do is enter it as an invoice and then prepay it at the year end.

You'll get the VAT back at invoice date.

If there are no VAT issues (because you're not registered), I might short-cut the process by not entering the invoice until it was paid. If I was feeling a bit lazy.

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Melchett
By thestudyman
18th Jan 2022 16:11

You book it in 2021 as normal, and then do a journal to prepay the whole expense to the balance sheet.

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