Deferrals in NAV 2016

Overview

With Deferrals, Microsoft has added a very interesting function in NAV 2016.

By setting up deferral templates, you can have the system create Deferral schedules from General Journals, Sales and Purchase documents and so on.

Features

You typically use Deferrals when you want to recognize revenue expenses on future dates, for example you invoice a customer for maintenance services for upcoming quarter or you receive fire insurance invoice for upcoming 12 months.

Typically, in Deferrals, the sales or purchase invoice is posted in advance which you would like to defer for future periods. This can be done via calculating Deferral schedule in following methods:

  1. Straight-Line
  2. Equal per Period
  3. Days per Period
  4. User Defined

You can use Deferrals in the following documents:

  1. General Journals
  2. Sales & Purchase:
    1. Invoice
    2. Credit Memo
    3. Order
    4. Return Order

Working with Deferrals

Creating Deferral Templates

You can assign deferral templates to documents, to journals and you can also link them to G/L accounts.

  1. In the Search (Ctrl+F3) type Deferral Templates, and open the related link.
  2. On the Deferral Template List window, click New to create a Deferral Template and specify the following fields:

Field

Description

Deferral Code

Specify the deferral template code

Description

Specify the deferral template description

Deferral Account

Specify the G/L account to which the deferral is posted

Deferral %

You can specify if you want to defer everything or a part with this template based on the percentage

Calc. Method

Select the calculation method:

  • Straight-Line
  • Equal per Period
  • Days per Period
  • User-Defined

Start Date

Select a start date setting:

  • Posting Date
    If you want to start on the posting date of the transaction
  • Beginning of Period
    If you want to start at the beginning of the period based on the posting date of the transaction
  • End of Period
    If you want to start at the end of the period based on the posting date of the transaction
  • Beginning of Next Period
    If you want to start at the beginning of the next period based on the posting date of the transaction

No. of Periods

Based on the quarter specify number of periods

Period Desc.

Specify the period description

 

The following picture shows some examples of Deferral Templates (Quarterly Expense, Monthly Expense, Monthly Sales:

Linking Deferral Template to G/L Account

In the following example we have created a G/L account (8140 – Insurance, Building) where we always receive insurance invoice upfront for the next 12 months, which means if I receive the invoice, I would like to divide insurance expenses over the next 12 months.

This is something that we can do by defining a Deferral Template and assigning it to the G/L account as a Default Deferral Template (of course, you can also do it via journals and documents).

Using Deferral in General Journals

In the following example, suppose you want to post your expenses on a particular posting date (in this case same as work date 26/01/2017). Perform the following tasks:

  1. Open the General Journal.
  2. Specify the following fields (example used in this case):
    1. Posting date = same as Work Date 26/01/2017
    2. Account No. = the Insurance, Building account 8140
    3. Gen. Posting Type = Blank
    4. Gen. bus. Posting Group = Blank
    5. Gen. Prod. Posting Group = Blank
    6. Amount = 2360 (my insurance amount)
    7. Bal. Account No. = 2910     (cash account for example)

    Notice that the Deferral Code field is automatically populated as EXP-M from the G/L Account. You can of course change it

  1. Before posting you can check the result, by using the Deferral Schedule action.

  1. Based on the amount and the Deferral Template, you can see that the system suggests the following schedule:

  1. In this example we would like to calculate equal amount per period, so change the Calc. Method to Equal per Period and click Calculate Schedule. Notice the result and click OK.

Similarly, you can use other Calculation Methods, thus have a very flexible deferral schedule calculation.

  1. Now post the General Journal.

  1. Now for the book keeping point of view, let us notice the result:
    1. Open the G/L Registers
    2. Select the last entry and navigate to the General Ledger to view the entries.

     

  2. You can see quiet a lot of G/L entries. So let us review the General Ledger Entries to see what is going on:
    1. First System will post, what we have entered in the journal. Observe the bottom line and the top line with balancing account (2190) respectively. Basically that is our initial posting.
    2. System will immediately reverse the posting. So it will reverse the expense, saying that the expense posting in January shouldn’t be completely assigned to January, against the deferral account that we have set up in the template (4020).
    3. Then for each month the system will take 1/12th of the total expense amount (2360 / 12 = 196.67 per month).

Using Deferral in a Document

We can use Deferrals in a document. In this example, probably the insurance expense will be invoiced by a purchase invoice (sent by a vendor). Perform the following steps:

  • Create a new Purchase Invoice. Use the following example:
    • Buy-from vendor No. = 30000
    • Posting Date = Same as Work Date 26/01/2017
    • Vendor Invoice No. = CT00125
    • Type = G/L Account
    • No. = 8140 (Insurance, Building)
    • Quantity = 1
    • Direct Unit Cost Excl. VAT = 2800
  • You will notice that the Deferral Code is defaulted to EXP-M from the G/L account card. Change it to quarterly expense EXP-Q.

  • Click Line, Deferral Schedule and see the result. In this case it is Quarterly Deferral.

  • Post the Purchase Invoice.
  • Open the G/L Register. Select the last line and Click General Ledger to check the G/L Entries.

 

About Paresh Sharma

https://au.linkedin.com/in/itspareshsharma

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