Overview

Prepaids represent expenses that are paid upfront for services or goods that will be used (expensed) in future accounting periods.

In SoftLedger, Prepaids can be created directly from bill line items. Instead of posting a bill line to an expense account immediately, prepaid line items post to a Prepaid Asset account, and the expense is recognized over time based on an amortization schedule.

This ensures expenses are recognized in the periods in which the benefit is received without requiring manual journal entries each month.

How Prepaids Work in SoftLedger

At a high level, the prepaid workflow looks like this:

Create a bill with a Prepaid line item
The bill posts the full amount to a Prepaid Asset account
A prepaid record is created with an amortization schedule
Scheduled prepaid lines are posted over time to an Expense account

Creating a Prepaid

Prepaids are created from bill line items. When creating or editing a bill:

Add a new line item
Set the Line Type to Prepaid
Select a Prepaid Account (this is the asset account)
Enter the amount and tax details as needed

Prepaid line items cannot be associated with Items and do not require an Expense Account at this stage.

Once the bill is saved, SoftLedger automatically creates a Draft Prepaid for that bill line.

Draft Prepaids

When a bill is created with a prepaid line, a draft prepaid is generated automatically. These drafts can be found under the Accounts Payable → Prepaids section or by clicking the prepaid line in bill detail tables.

Draft prepaids:

Are separate from the bill’s draft/approval status
Exist so you can finish defining the amortization details (e.g. expense account, amortization calculation method, descriptions, etc.)
Do not post any expense until the draft prepaid is reviewed and activated

What’s Missing in a Draft Prepaid

To move a draft prepaid to active, the following fields must be completed:

Amortization Method
End Date
Expense Account
Description (optional)
Review and/or submission of the scheduled journal lines

Activating a Prepaid

To activate a prepaid:

Open the prepaid from:
- The Bill Detail page, or
- Accounts Payable → Prepaids
Edit the prepaid and complete all required fields
Save the prepaid

Once saved, the prepaid becomes Active, and its amortization schedule is ready to post, meaning the user can create the scheduled journal lines.

Bulk Activating Draft Prepaids

After selecting draft prepaid lines, clicking the Review Draft Prepaids bulk action will open a modal that allows review of each draft prepaid selected.

User can move forward and backward through the prepaids using the buttons at the top-right of the modal
User can skip the current prepaid by clicking the Skip button at the bottom-right.
After all the details are provided, user can click the Update button at the bottom-right to update the prepaid and move to the next one
Dialog will automatically close when all the selected draft prepaids have been reviewed

Amortization Methods

SoftLedger supports three amortization methods:

Monthly Prorated

First month is prorated by days
Middle months are amortized evenly (total amount / total months)
Last month picks up the remaining balance
One entry per monthly accounting period

Daily Prorated

Amount is calculated based on the number of days in each month
One entry per monthly accounting period

Custom

Fully manual schedule
Allows you to edit individual schedule journal lines
Required if you need non-standard timing or amounts

Posting Schedule Lines

Each prepaid generates schedule lines, which represent when the expense will be recognized. You can post prepaid expenses in multiple ways:

From Accounts Payable → Prepaids→Prepaid Lines
- In bulk, using filters (e.g. set Status as “Pending”)
Clicking into any Prepaids line item to access the Prepaid Detail page using Post All Available Journals for that particular Prepaid