Prepayments are usually booked at regular intervals (monthly) as the service is consumed or the tool is used.
For example, $6000 is paid as an advance for AWS for six months starting January. An amount of $1000 will be booked at the end of each month for a period of six months.
Follow these steps to amortize your Virtual Card expenses:
Step 1: Mark the Expense as Prepaid.
Virtual Card Rules, after they’re approved, tell Airbase how to create a ledger entry for each Recurring Virtual Card transaction.
To amortize an expense, you need to edit the expense’s Virtual Card Rule and mark it as a prepayment.
To mark an expense as amortized:
- Go to Accounting > Virtual Card Rules > Pending Review.
- Hover over the rule to find Edit option.
- Check Amortization.
- Edit details of the ledger entry such as the account and vendor name if necessary.
- Click Save and Approve Rule.
Once the Virtual Card Rule has been edited and approved it will move from the Pending Review tab to the Completed Review tab.
Even if amortization is enabled on a Virtual Card Rule, the user still needs to edit the ledger entry to set the amortization start and end dates.
Step 2: Generate the Amortization Schedule.
The next step is to generate a schedule that Airbase can follow to book each installment in your General Ledger.
- Go to Accounting > Ledger Entries > Completed Review.
- Find the entry.
- Airbase will automatically pick up the Start Date and End Date of the contract based on information provided when the expense was created. Click Edit to update the amortization Start Date and End Date and click Save.
- Click Generate Amortized Expenses.
- A window will slide out with the schedule of the booking and the total amount split equally for a period of time.
- Review the details and click Submit.
Periodic entries will be automatically made according to the amortization schedule.
Step 3: Keep track of remaining and completed entries in the Amortization Schedule.
Keep track of all the pending entries for the amortized expense on Accounting > Ledger Entries > Amortized Entries page.