Prepaid Expenses and Automatic Amortization Across Periods

Wafeq allows you to automatically amortize prepaid expenses—such as annual rent—across the relevant accounting periods. This ensures each period is charged with its fair share of the expense instead of recording the full amount upfront, resulting in more accurate and consistent financial reporting.

Creating a Purchase Bill with Amortization Enabled

Start by creating a purchase bill that includes the prepaid expense:

1. From the main menu, go to “Purchases” then click on “Purchase Bills.”

2. Click “Create Purchase Bill” and choose “Create Purchase Bill manually”, or use other options such as uploading a file or receiving the bill via WhatsApp or email.

Enter the basic bill details such as (supplier, date, amount…).

In the bill line item:

• Description: Enter a clear description of the expense (e.g., Annual rent, Software subscription, Annual insurance).
• Amount: Enter the total prepaid amount (e.g., 12,000).
• Account: Select “Prepaid Expenses”, which temporarily holds the amount before it is amortized.

Adding Amortization

After selecting the account, click:

“Add Amortization”

Then enter the following details:

• Start date: Defines when expense recognition begins.
  You can enter it manually or enable “Same as bill.”
  ⚠️ If the start date is not the first of the month, the first period will be partial and its amount will differ.
• End date: Define the end of the period or number of months (e.g., 12 months).
• Expense account: The account where the expense will be recognized (e.g., Rent expense).
• Distribution method:
  • Even monthly distribution
  • By number of days in month

A schedule will be generated automatically showing:

• Amount per period
• Posting date
• Remaining balance

Saving and Approving the Bill

Click “Save as draft” or “Authorize.”

Once approved:

• The full amount is recorded as a Prepaid Expense
• The system automatically creates a journal entry each period to recognize part of the expense

Example:
12,000 over 12 months
→ 1,000 recognized monthly
→ Prepaid balance decreases to zero

Tracking Amortization

To review:

• Open the bill
• Go to “Amortization” tab

You will see:

• Amortization schedule
• Remaining prepaid balance
• Journal entry icon for each period to view the entry details