Everything you should know about Deferred Expense Models in Odoo

Everything you should know about Deferred Expense Models in Odoo Prepaid or deferred costs include things like car and home insurance premiums, water and electricity bills, and rent payments that have already been made but won’t be used for some time. Since the money in the prepayment account was paid ahead of time, it is considered an asset. Consumption over time is what will be recorded in P&L and Balance Sheet.

Our article today on Everything you should know about Deferred Expense Models in Odoo will shed some light on the advantages of these models as well as guide you to utilize them for your online business. Keep reading to find out more!

Table of Contents

• The benefits of Deferred Expense Models in Odoo
• Everything you should know about Deferred Expense Models in Odoo
  • Step 1: Create a new deferred expense model
  • Step 2: Apply the model to entries
  • Step 3: Automate deferred expense
• To sum up

The benefits of Deferred Expense Models in Odoo

That which has been paid out but not yet received or used is known as a Deferred Expense. The business treats these expenses as if they were cash on hand. The transaction will be recorded as an expenditure in the future; thus, the cash outlay cannot be reflected in the current income statement or the income account.

The company’s balance sheet will need to reflect the deferral of future costs until such time as they may be recognized in full over a certain period. If, for instance, you prepay $1,200 for a whole year but haven’t utilized the service yet, the payment will still be shown in your account and counted against your monthly total. Therefore, $100 will be deducted annually as a cost.

Everything you should know about Deferred Expense Models in Odoo

Managing Deferred Expenses is a challenging task, especially for newcomers. That’s why it is advisable that online merchants at the beginner level should make use of the Deferred Expense models. Everything you should know about Deferred Expense models in Odoo will be explained in three basic steps. Each of them comes along with exemplified images so that the administrator can compare the results and save up as much time as possible.

Step 1: Create a new deferred expense model

Deferred Expense models come in a variety of flavors. You can access options from the module’s dashboard and begin creating Deferred Expense models immediately. Choose a model for deferred costs from the menu. The deferred Expense Models page will load.

Click the Create button to generate a new Deferred Expense model. A setup page for the Deferred Expenses model will load, as seen in the following example.

Step 2: Apply the model to entries

The setup page allows you to input the name of the Deferred Expense models and choose the desired amount of recognitions. Time may be shown in either years or months.

The Prorata Temporis option is on the table. Using Prorata Temporis, you may accurately account for your income over a certain time period. Rather than using the standard length of time of recognition, the first item on the Revenue Board is now determined by the amount of time left between the Prorata Date and the First Recognition Date.

The account’s associated models are shown as new buttons at the top of the form. When you choose a model from the drop-down menu, the form will be completed in that style.

In the screenshot above, you can see that the deferred account has the name Prepaid insurance, which we established before. In addition, the Expense Account you set up in the Chart of Accounts section appears as an option in the Expenses box. Select the appropriate Journal from the Journal drop-down menu; in this case, Miscellaneous operations has been selected, but you may change it to anything else if that’s more in line with your company’s ethos.

You may customize the Deferred spending model by including an Analytic Account and an Analytic tag through the corresponding fields and clicking Save.

Step 3: Automate deferred expense

A current asset or prepayment account may be set up to automatically postpone any costs that are credited to it, and this setting can be adjusted at any time throughout the account’s creation or editing process. With the Automate Deferred Expense field, online merchants will be able to choose among three alternatives, including:

• No: The default setting is as seen above. Basically, nothing occurs.
• Create in Draft: An unconfirmed draft Deferred Expenses record is generated whenever a transaction is submitted to the account. To get started, go to Accounting > Accounting > Deferred Expenses and fill out the form there.
• Create and Validate: Furthermore, a Deferred Expense Model must be chosen. A Deferred Expenses record is generated and quickly verified after each time a transaction is submitted to the account.

When you make this selection, a new field titled Deferred Expense Model appears, as seen above. Pick the model, plug it into your data, then hit the Save button. For completely automated product purchases, you may set this account as the default Expense Account.

To sum up

In conclusion, our article on Everything you should know about the Deferred Expense Model in Odoo has answered all your wonders and will help you solve the existing problems. If you have any questions related to the topic, feel free to contact Odoo supporting team for further assistance.