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Accounts Payable - Expense Amortization

What are the benefits of Amortizing Expenses in PeopleSoft Accounts Payable? Well for starters, it reduces the manual creation of journal entries to amortize advance payments. Secondly, it reduces the balance of the prepaid account. It also provides the ability to create Stage journals that can be reviewed and edited before the actual journals are created and sent to the General Ledger.

In PeopleSoft Accounts Payable, the first step for Amortizing Expenses is to define what types of Expenses your company will be amortizing such as, professional Fees, insurance Premiums, dues/memberships, licenses, maintenance, etc. This can be done on the “Amortization Type Page” which can be found using this navigation: Set up Financials/Supply Chain > Common Definitions > Journals > Amortization Type. Additionally, you will also have to define the Types that you have just listed. This can be done on the “Amortization Template Page” which can be found using the navigation: Set up Financials/Supply Chain > Common Definitions > Accounting Entry Templates > Amortization Template. On this page you can take a deeper dive into each “Type” and define them more thoroughly in the chartfields tab. You can define what account, alternate account, fund code, operating unit, department, etc. that the expense will be associated with. Once you have set up the different Types and Templates for the Expenses that will be amortized, you will also want to set up the “Summary Calendar” which will summarize the detail calendar into a specified number of periods used with summary ledgers to produce summary reports. Do you want to set up the expenses to amortized on a monthly basis, quarterly, yearly? You can define this by navigating to: Set Up Financials/Supply Chain > Common Definitions > Calendar/Schedules > Summary Calendar.

Ok, great, we’ve done some basic setups! Now let’s do a walkthrough and see how an Accounts Payable person would create an Amortization Expense by creating an Amortization Voucher in PeopleSoft 9.2.

When you create a voucher in PeopleSoft accounts payable 9.2, you have the option to create an Amortization Voucher. Unlike a Regular Voucher, the Amortization Voucher will create an Amortization tab on the distribution line. Here, you can add the Merchandise Amount, Quantity, Start and End Date of the Amortized Expense and the Amortization Type. Also, on the Distribution Line you can click on the GL Chart tab and select the appropriate account that the Expense Type will be associated with. Once you save the Amortization Voucher, a specific Amortization ID is created, and the Voucher is ready to be Posted. In order for the Expense Amortization to be processed, edited and scheduled, the voucher must be posted first. Great job! You created and posted your first Amortization Expense Voucher!

Now where does the Amortization Voucher go from here? The voucher can now be scheduled for the Stage Journal using the “Amortization Schedule Page” found navigating to: General Ledger > Journals > Pre-Amortization Journals > Amortization Schedule. Here you can look up the Amortized Vouchers and create Stage Journals by selecting the “Stage” button. When the Stage Journal is created now you can review, edit and approve the amortized vouchers. This is a great option because you can visually see all the payments broken down on a monthly/quarterly basis. Now that everything looks good and it has been approved, the last step is to Generate Amortization Journals which are sent to the General Ledger. You can do this by navigating to: General Ledger > Journals > Pre-Amortization Journals > Generate Amortization Journals.

Next time your business has a pre-paid expense (insurance, legal fees, rent, dues, licenses, etc), keep in mind that you have this option to amortize those expenses over it’s intended usage period and recognize it when it is incurred. PeopleSoft assists with tracking and recording these services so when the service is rendered, the pre-paid account is credited and the corresponding expense account in the general ledger is debited. Let PeopleSoft’s Expense Amortization feature help take your accounts payable process to the next level by removing the old school pain points with a faster and more efficient way of conducting business.

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