Amortization of expenses and revenues allows you to spread out your costs or income over a defined period of time. In Sage Intacct Planning (SIP), you can amortize expenses or revenues:

In this article, you can see how to add an amortized expense to your budget using either of the two methods described above for expense amortization. Both options cannot be used at the same time. So, if you choose the first method of defining an expensing period, the advanced options are not displayed, and vice versa.

For our purposes, let’s suppose you have a $60,000 bill for rent that you want to amortize over 12 months, with a one-time prepaid expense on January 2020, and delayed payment of 2 months.

The simplest way to amortize this expense is to define the Expensing Period.

To amortize an expense:

1. From the Inputs > Main tab, add an expense budget line named Rent under the Operational Expenses budget category.

2. Select the Rent budget line in your budget tree. In the Occurs field, choose Once from the dropdown, and in the On field enter 01/2020 for the date on which the expense occurs.

3. In the Amount field, enter $60,000 as the “one-time” expense amount you want to be amortized for the year’s rent. At this point, notice that in both your Preview of Cash and Preview of P&L views, an entry of $60,000 appears in the column JAN 2020.

4. In the Expensing period field, enter 12 for the period in months you want the expense to be amortized. In the Preview of P&L frame, the expense is spread out evenly over the 12 months.

5. If you want to change the timing of the cash payment to March 2020 instead of January, enter 2 and choose months after in the Payment field. The expense for the P&L remains equally amortized across the entire year and the Preview of P&L remains the same as in the previous step. The Preview of Cash appears as follows:

6. Click Save now to save your changes.

📝 In the background, the deferred revenue and accounts receivable balance sheet lines are also created and appear, as shown, in the Sheets > Balance sheet tab:

In the Assets section of the balance sheet, the Cash and cash equivalents line item shows the one-time payment of $60,000 made in March 2020. The Pre-payments line item shows the expense amortization and how its value is reduced on the balance sheet, thereby reducing the amount of total assets for the duration of the defined period. The Accounts payable line item shows the amount of rent incurred, but which has not been paid as of the dates in the balance sheet. In our example, the cash payment is made in March 2020, so the liability only appears under January and February.

If you need some more advanced options to define advanced cash payment amounts or expense recognition and payment schedules, you can use the Advanced cash and expense recognition option.

This option provides you with advanced options like defining different cash payment percentages, amortization of an expense with uneven amounts each month, intermittent payments, etc.

To define advanced cash payments and expense recognition:

1. From the Inputs > Main tab, add an expense budget line named Rent under the Operational Expenses budget category.

2. Select the Rent budget line in your budget tree. In the Occurs field, choose Once from the dropdown, and in the On field enter 01/2020 for the date on which the expense occurs.

3. In the Amount field, enter $60,000 as the “one-time” expense amount you want to be amortized for the year’s rent. An entry of $60,000 appears in the column JAN 2020 in both your Preview of Cash and Preview of P&L views.

4. Scroll down and select the Use advanced cash and recognition options checkbox. In the Period field, 12 months appears as the default for the period (in months) you want to amortize the prepaid expense. This field can be edited to make the period longer or shorter.

The month fields (1 to 12) are displayed in the Cash paid and in the Expense recognition sections. The significance of the numbered months is dependent on the start date that you defined in the On field. For example, if the On date is 01/2020, then Month 1=January, Month 2=February, Month 3=March, and so on.

5. To make a delayed payment and change the timing of the cash payment to March 2020, instead of January, enter 100% in the Month 3 field. The Preview of Cash appears as follows:

If you prefer to split the cash payment, for instance, you could enter for example 50% in Month 3 (March 2020) and 50% in Month 6 (June 2020).

📝 Important: If you initially defined the “one-time” expense occurrence to be, for example, 3/2020 in the On field and the cash payment as 100% in Month 3, the cash payment would appear in May 2020 (and not in March 2020) in the Preview of Cash, where now Month 1=March, Month 2=April, and Month 3=May, and so on.

6. To amortize the expense equally across the entire year for the P&L, enter 8.33% for all of the month (Month 1 to Month 12). Keep in mind that the total of the months must equal 100%. The Preview of P&L appears as follows:

7. Change the expense amortization start date, the percentage amounts, and scheduled months as long as the entries total 100%. The amounts can be uneven or intermittent. For example, you can choose to leave Month 4 (April 2020) blank and enter 16.66% for Month 5 (May 2020) instead.

8. Click Save now to save your changes.