Simplify your accounting processes with a free prepayment template

A robust prepayment schedule is one of the quiet workhorses of a tidy set of accounts. It takes a cost you have paid up front and spreads it neatly across the months it belongs to, so your profit and loss account and your balance sheet both tell the right story. This article explains what the schedule does, why it makes an accountant's life easier, and how to get a free template you can start using straight away.

What is a prepayment, and why schedule it?

A prepayment is an expense you have paid before the period it covers. Annual insurance, a software subscription, or rent paid in advance are common examples. Under the accruals concept, the cost should be recognised over the period it relates to — not all at once when the invoice is paid.

A prepayment schedule is the working paper that makes this happen. It lists each prepaid cost, records the period it covers, and releases a portion to the profit and loss account each month. The remainder stays on the balance sheet as a prepayment until it is used up.

Why does a prepayment schedule make an accountant's life easier?

A well-built schedule removes repetitive work and gives you something firm to stand on when the balance is questioned. The main benefits are:

• Automated amortisation: the schedule calculates the monthly charge for you, saving time and reducing manual errors.
• Impeccable item tracking: every prepaid item is listed in one place, so nothing is overlooked or double-counted.
• Balanced proof: the schedule ties the closing balance back to the invoices behind it, giving concrete proof for a smoother audit.
• Expense forecasting: because future charges are already mapped out, the schedule doubles as a forecast of the cost yet to hit the profit and loss account.
• Contract tracking: the same layout works as a contract tracker, showing which agreements are live and when they expire.

What does a prepayment schedule contain?

Each row of the schedule captures one prepaid cost and everything needed to release it correctly. A typical layout looks like this:

Because each column feeds the next, you fill in only a few cells and the schedule does the rest. It is a schedule you can build yourself in Excel using a handful of core Excel functions, and pull figures across from other tabs with a lookup formula such as XLOOKUP or VLOOKUP.

How does amortisation work in the template?

The template uses straight-line amortisation, which spreads a cost evenly across the months it covers. The monthly charge is simply the total cost divided by the number of months:

Monthly charge = Total cost / Number of months

Take an insurance premium of S$12,000 paid on 1 January for the year ahead. Divided across 12 months, the charge is S$1,000 each month:

S$12,000 / 12 = S$1,000 per month

After the first month, S$1,000 is expensed and S$11,000 remains as a prepayment on the balance sheet. The template repeats this each month until the balance reaches zero, so at any close you can read off both the expense to post and the balance that should remain. If you maintain several of these schedules across group entities, Power Query can consolidate them into a single view.

Can the template handle equipment and leased assets?

Yes. The same straight-line logic that spreads a prepaid cost also spreads the cost of a longer-lived asset over its useful life, so the template works for two more jobs:

• Property, plant and equipment depreciation. IAS 16 Property, Plant and Equipment requires the cost of an asset to be depreciated over its useful life. On a straight-line basis, that is the same monthly-charge calculation. For equipment costing S$24,000 over 24 months, the charge is S$1,000 a month.
• Right-of-use asset amortisation. IFRS 16 Leases brings most leases onto the balance sheet as a right-of-use asset, which is then amortised over the lease term. Where that charge is straight-line, the same template applies.

Keeping prepayments, depreciation, and lease amortisation in one consistent format means less time spent reinventing a working paper for each.

How do you get the free template?

The template is free. Here is how to get it:

• Register your interest by emailing us at hello@backbone.sg.
• Follow the Backbone page to stay updated on accounting tools and tips.

Put the schedule to work on your prepayments first, then reuse it for equipment and leased assets — one simple spreadsheet that keeps three routine tasks tidy and audit-ready.