How to Record and Allocate Prepaid Expenses in Qoyod (Manually or Automatically with Deferral Templates) and Why Prepaid Expenses Cannot Be Added to Purchase Invoices

How to Add and Record Prepaid Expenses in Qoyod System

(With Manual or Automatic Distribution Using Deferral Templates)

First: What is a Prepaid Expense?

A prepaid expense is an amount paid in advance for a service or benefit that will be utilized over future periods, not in the same period as the payment.

Common examples:

• Rent paid for a full year

• Annual subscription

• Insurance paid in advance

In these cases, the amount is not recorded as a single expense, but rather as a current asset that is then distributed over the periods to which it applies.

Method One: Manual Distribution (Traditional Accounting Method)

1. Create a Prepaid Expense Account

• Create an account named Prepaid Expenses

• It should be a sub-account of Current Assets

2. Record the Expense at Payment

At the time of payment, it is recorded as an asset:

• Debit: Prepaid Expense Account

• Credit: Cash or Bank

The expense does not appear on the income statement; it only appears on the balance sheet.

3. Record the Accrual (Monthly or Per Period)

When the expense is incurred:

• Debit: Expense Account (such as Rent Expense)

• Credit: Prepaid Expense Account

⚠️ This entry is made manually for each period; the system does not distribute it automatically.

Method Two (Alternative and Better): Using Deferral Templates

Instead of manually distributing the expense or revenue each month, you can use deferral templates, a feature designed to automatically distribute revenues or expenses over future periods.

What is the Concept of Deferral Templates?

Deferral templates allow you to record the revenue or expense once, and the system automatically distributes it across the specified periods.

Example:

Annual subscription for 12,000 SAR
Instead of recording it entirely in one month
It is distributed as 1,000 SAR per month for 12 months

Benefits of Deferral Templates for the Customer

• Financial statements are more accurate and reflect the true performance for each period

• Errors from manual entries are reduced

• Significant time and effort savings

• Automatic distribution without monthly intervention

How to Create a Deferral Template

Go to:
Accounting → Deferral Templates

Then:

• Click Create New Deferral Template

• Enter the following information:

  • Template name (Arabic / English)

  • Description (optional)

  • Deferral type:

    • Revenue (Sales)

    • Expense (Purchases)

  • Deferral Account

    • Such as: Prepaid Expenses or Deferred Revenue

  • Number of periods (e.g., 12 months)

  • Calculation method

  • Distribution start basis

  • Period entry description (optional)

  • Default returns behavior
    (Returning the item cancels future periods)

  • Status: Active

Then click Save

Link the Template to the Accounting Account

After creating the template:

• Go to Accounting → Chart of Accounts

• Select the account to which the distribution will apply
  (Such as: Other Revenue or Rent Expense)

• Click Edit

• Select the deferral template from the Deferral Code field

• Save

Using the Deferral Template When Creating an Entry

When creating a manual accounting entry:

• Select the account linked to the deferral template
  Example:

  • From: Cash

  • To: Other Revenue Account (linked to the template)

• Click Save with Deferral

The system will do the following:

• Load the full amount to the Deferred Revenue or Prepaid Expense account

• Create automatic distribution entries for each period

• You can preview the distribution schedule before saving using the View button next to the account

Then:

• Click Save with Deferral to approve the entry

Important Notes

• Deferral templates cannot be used through purchase or sales invoices

• Prepaid expenses cannot be added through purchase invoices because products or expenses cannot be linked to a current assets account.

• Used only with manual accounting entries

• If a period or fiscal year is closed, future entries will not be created for closed periods

• Tax is recorded according to the original entry and is not distributed

Which Should I Use?

• If you have a simple expense or revenue → Manual distribution is sufficient

• If you have subscriptions or long-term contracts → Deferral templates are the best option

Summary

• Prepaid expenses can be managed manually or automatically

• Deferral templates provide automatic and accurate distribution

• They reduce errors and improve financial statements

• No monthly intervention is needed after setup

Keywords

Prepaid expense
Deferred revenue
Expense distribution
Deferral templates
Revenue deferral
Annual subscription