Overview of Deferred Income

Some Of the nominals and ledgers used in this topic may be different to those in your chart of accounts.

Deferred income is required when income has been received for goods or services, but the full benefit of these goods or services is realised in the future. For example, additional pupil funding is received in one lump sum, but may cover 12 monthly periods. In this circumstance, you need to ensure that the income is correctly reflected across the accounting periods during which the benefit is received. This is achieved by deferring the income

Before posting any deferred income, it is essential to check that all the accounting periods within the deferral time frame exist, and have a security role of PERIOD.8 or less.

If this is not the case, deferred income may be posted to future periods or to the Register period, which can be time consuming to rectify. For information on how to check the access level, please see Opening/Closing Accounting Periods.

If you experience any problems with deferred income as a consequence of accounting periods being closed or having the wrong access level, please see Dealing with Deferred Income Posted to the Wrong Period.

In the following deferral example, additional pupil funding is received in one lump sum, but covers 12 monthly periods. The income would typically be deferred as follows:

Period 1	£1,000
Period 2	£1,000
Period 3	£1,000
Period 4	£1,000
Period 5	£1,000
Period 6	£1,000
Period 7	£1,000
Period 8	£1,000
Period 9	£1,000
Period 10	£1,000
Period 11	£1,000
Period 12	£1,000
Total	£12,000

Deferred income should be entered at the time the applicable document is posted (in most cases, a nominal receipt) to ensure that the system calculates, then allocates the correct income to the applicable accounting period. This is achieved by entering deferral start and end dates in the applicable document, typically a Nominal Receipt document. The system then runs a rule, which automatically allocates the correct deferred income portion to the applicable accounting periods.

Deferred income can also be recorded in Sales Invoice and Sales Credit documents (to ensure that any applicable deferred income is reversed where a sales credit note is sent out).

What Happens When the Document is Posted

Deferred income is posted as reversing journals. Once the applicable document has been posted, the system automatically posts two types of document:

DB – Deferred Income to Balance Sheet document

A DB - Deferred Income to Balance Sheet document is posted, which transfers the balance from the applicable income nominal and account, into the deferred income nominal on the balance sheet. Using our earlier example, the £12,000 pupil funding top-up has been transferred.

DM – Deferred Income Movement to Income

Based on the deferral start and end dates previously entered, the system calculates the number of accounting periods within the time frame, together with the amount that should be allocated to each accounting period. A DM - deferred Income Movement to Income document is then posted for each applicable accounting period. Using our earlier example, 12 documents are created for each accounting period within the year for a value of £1000.

Each of these documents reverses the income from the balance sheet nominal back to the income nominal and account.