Maximizing Deferred Expense Feature in Empress

Guides & Tutorials
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Introduction

Introduction

The Deferred Expense feature in Empress is a fantastic tool that helps businesses manage and track costs that have been incurred but haven’t been consumed yet. From a business perspective, this feature provides a clear picture of your financial status by accurately accounting for costs according to when they’re truly used, rather than when they’re paid.

This guide will guide you on how to make the most of the Deferred Expense feature in Empress, helping you streamline your financial management activities. We’ll cover how to view, edit, sort, and track information using this feature.

Configuring Deferred Accounting

To begin, let’s look at some settings in Empress that can help you tailor the Deferred Expense feature to your needs.

  1. Automatically Process Deferred Accounting Entry: This setting is turned on by default. If you’d rather manually manage your deferred accounting entries, you can turn this off.
  2. Book Deferred Entries Based On: Here, you can decide whether to book deferred expenses based on “Days” or “Months”. By default, it’s set to “Days”.
  3. Book Deferred Entries Via Journal Entry: This setting allows you to book deferred amount entries via Journal Entry instead of Ledger Entries, giving you more control over the booking process.
  4. Submit Journal Entries: If you’re posting deferred accounting entries via Journal Entry, this setting determines whether those entries will be automatically submitted or left in Draft state for manual verification.

Utilizing Deferred Expense

Let’s illustrate how Deferred Expense works with an example. Suppose a company, Unico Plastics, pays $10,000 in April for its rent in May. In April, this cost is recorded as a deferred expense. In May, when the rent is used, this deferred expense is then recorded as a regular expense.

Here are some other common examples of Deferred Expenses:

  • Prepaid insurance for future coverage
  • Costs of a fixed asset that are spread over its useful life as depreciation
  • Upfront payment for an Internet subscription, which is delivered every month

Now let’s see how to set up and use Deferred Expense in Empress.

Item Configuration

In the Item master, you’ll find a section for Deferred Expense. Here, you can enable Deferred Expense for a specific item, choose an account for it, and set the number of months over which the expense will be deferred.

Purchase Invoice Creation

When creating a Purchase Invoice for an item with Deferred Expense, the purchase amount is credited to the Deferred Expense account rather than the Expense Account.

Journal Entry

Based on the dates you set in the Purchase Invoice Item table, Journal Entries are automatically created at the end of each month. These entries debit the value from the Deferred Expense account and credit the Expense Account.

Conclusion

The Deferred Expense feature in Empress offers a more accurate and efficient way to manage and track your business expenses, helping you gain better control over your finances. For more resources or support, please visit our help center or contact our support team.