Re: Prospective User Questions

[Rich Shepard <..hidden..>]

On Tue, 1 Dec 2009, Chris Travers wrote:

> Just to clarify the problem with prepayments:
>
> The issue is that payments in LedgerSMB (following SQL-Ledger 2.6) end up
> going against the same AR/AP account as the invoice.  For prepayments,
> this is not correct accounting because it mixes liabilities with assets.

Chris,

  Just came back from a visit to my accountant to learn how she wants this
handled. The first invoice (that the client needed in order to make the
first retainer) gets backed out. The payment is then made to a specific
client/project without reference to an invoice.

  At the end of the month, the client gets an invoice based on the number of
hours worked on the project, and the prepayment is applied. This means the
client either has a credit remaining (if not all pre-paid hours were spent
on the project that month) or owes for additional hours. This cycle
continues for the project duration.

  If it was possible to produce a statement rather than only an invoice
there would be no problem. It would begin with the initial payment, time on
the project would then be detailed below it (reducing the unexpended
amount), and this could be continued for the life of the project or done
month-by-month.

Thanks,

Rich