Example: Deferral of Rent Paid in Advance

Show TOC

Example: Deferral of Rent Paid in Advance

Starting Situation

You have a lease-out contract 111 in company code 0001 with the following conditions and payment forms:

Payment form: In advance

Payment frequency: 3 months

Payment start:01/01/2004

Condition: Basic rent

Condition amount: EUR 3000

The cash flow of contract 111 has the following records for the year 2004:

Calculated From - To	Condition Amount	Due Date
01/01 – 03/31/2004	3000	01/01/2004
04/01 – 06/30/2004	3000	04/01/2004
07/01 – 09/30/2004	3000	07/01/2004
10/01 – 12/31/2004	3000	10/01/2004

Transfer of Data to the Accrual Engine and Financial Accounting

You perform a deferral for the amount of 3000 in the cash flow on March 31, 2004. To do so, follow the procedure described in Accruals and Deferrals for Conditions Paid in Advance or Arrears .

The following objects are automatically created in the Accrual Engine:

Accrual object: Contract 111

Accrual subobject:0001/111/1 for the first quarter

(and later for the rest of the year:

0001/111/2 for the second quarter

0001/111/3 for the third quarter

0001/111/4 for the fourth quarter

You can display the accrual subobject 0001/2111/1 for the first quarter ( Display Accrual/Deferral Results ). The following accruals were calculated for this object (periodic revenue recognition):

Condition	Calculated From - To	Accrual/Deferral Amount	Cumulative Amount	Key Date
Basic rent	01/01 – 01/31/2004	1000	0	03/31/2004
Basic rent	01/01 – 02/28/2004	1000	1000	03/31/2004
Basic rent	01/01 – 03/31/2004	1000	2000	03/31/2004

On the Postings tab page, you can display the postings for the key date March 31, 2004:

Activity Type	Calculated From - To	Condition Amount	Key Date
Allocation in the Accrual Engine:	01/01 – 03/31/2004	3000	03/31/2004
Periodic revenue recognition	01/01 – 01/31/2004	1000	03/31/2004
Periodic revenue recognition	02/01 – 02/28/2004	1000	03/31/2004
Periodic revenue recognition	03/01 – 03/31/2004	1000	03/31/2004

For the April 1, 2004 key date, the system would also create two additional items for the allocation posting for the second quarter and the first periodic revenue recognition for the first period in the second quarter.

Determination of Accrual/Deferral Amount

The accrual/deferral posting (based on the key date) determines if:

There are flow records for which a debit positionhas already been posted
The date of the calculation to is after the key date

The accrual/deferral run enters accrual/deferral flows for these flow records for the period from the calculation from (of the posting) to the key date (of the accrual/deferral run) in the cash flowand then the system posts them.

Posting

You enter the accounts for each accrual type in Customizing. When the accrual/deferral is run, then the records are posted based on this outline:

credit x, debit y Credit ( posting key) account, debit (posting key) account (amount)
Periodic posting January	(01) Customer receivables	(50) Revenue from basic rent (3000)
January: Opening posting Accrual/Deferral Amount	(40) Deferral from rent paid in advance (40) Deferred income	(50) Deferral (3000) (50) Deferral from rent paid in advance (1000)
Accrual/Deferral February	(40) Deferred income	(50) Deferral from rent paid in advance (1000)
Accrual/Deferral March	(40) Deferred income	(50) Deferral from rent paid in advance (1000)
Result: Each posting period has a balance of 1000 revenue.

Note Note

For information on accruals , refer to Example: Accrual of Rent Paid in Arrears .

End of the note.