Deferred Income and Expenses Write-Off

Deferred expense is the cost that a company has already paid for certain services but it will not report this cost as an expense until later in an accounting period, depending on when the service underlying the deferred expense will be consumed.
Note: In Codejig ERP, only services can be recognized as deferred expenses, not goods. While adding a new item to the system, you can define it as a deferred expense in item details. Then, when you purchase such service which you have recorded as a deferred expense, you add it under the Services tab of a purchase invoice.
For example, a company makes advance payment for insurance coverage for the next 12 months. Although the company has paid upfront, the expense should be recognized in portions over the period of 12 months being divided evenly across all intervals in a given time span, but not immediately after the payment. So, the company records the purchase of the insurance coverage as a deferred expense in a purchase invoice and specify a period over which it will be used (12 months), also indicating specific months when the company starts and finishes using it.  
 
In Codejig ERP, the deferred expense account was created to hold such costs as assets on the balance sheet. Periodically, portions of those assets are charged to expenses once the company receives the benefit of the deferred expense. In case of insurance coverage, the expense is charged once a month over 12 months, starting from the first month of usage period and ending at the last month of usage period.
Note: In Codejig ERP, expense is recognized proportionately over the number of months in a period for which a service underlying the deferred expense will be fully consumed. Information about the length of use periods is defined/provided in purchase invoices for services recognized as deferred expenses. 
To recognize the expense, the Write-off of deferred expenses document is automatically generated and posted at the end of each month in Codejig ERP. This document triggers the write-off of deferred expenses.
 
However, you can create the Write off of deferred expenses document manually if required.
 
The document takes data from the Deferred expenses journal, to which purchase invoices containing deferred expenses make posting entries, and writes off the portion of each deferred expense according to the linear write-off method. As a result, corresponding expense accounts are debited and the deferred expense account is credited. The portion of assets is removed from the balance sheet and is transferred to the profit & loss report (income statement) as an expense.
Note: Linear write-off method - deferred expense is evenly divided across all month in the defined period for write-off.
To access the Write-off of deferred expenses document
 
  • On the Codejig ERP Main menu, go to the Accountant module, and then select Write off of deferred expenses.
 
 
More information
Manage Auto-Generated Write-Off of Deferred Expenses
Manually Trigger the Write-Off of Deferred Expenses
Write-Off of Deferred Expenses: General Area
Item: General Area