Accruals & Prepaid Amortization — Controller Guide
An accrual records a cost in the month it belongs to, even though the paperwork — the vendor bill, the payroll run — hasn't arrived yet. A prepaid is the mirror image: you paid cash up front for something you'll use up over several months, so you spread the expense out instead of taking it all at once. This guide explains both, then walks the exact clicks in Arcvue. It assumes you run a business but aren't a career accountant.
For: controllers · Time: ~10 minutes · You'll need: the Accounting module.
These are two different pages. Accruals are proposed from the Month-end accruals panel on Accounting → General Ledger → Period Close (/accounting/close). Prepaid amortization is its own register at Accounting → Assets → Prepaid (/accounting/prepaid). Keeping them separate is deliberate — an accrual reverses next month; a prepaid does not.
Part 1 — The ideas you need first (read once)
Why accruals exist
Costs don't always show up in the month they were incurred. A vendor does work in May but doesn't send the invoice until June. A pay period straddles month-end. If you only booked costs when the paperwork landed, May would look artificially cheap and June artificially expensive — and neither month would be true.
An accrual fixes that: you book the cost in the month it belongs to, based on what you know, then it settles when the real document arrives. It's the accounting equivalent of "I know I owe for this — put it in the right month."
Reversing (accruals) vs. non-reversing (prepaids)
This is the one distinction to hold in your head, because it decides which page you use:
- Reversing accrual — you book an estimate at month-end, and it automatically reverses on the first day of the next month. Then the real invoice or payroll posts normally. The reverse-and-replace nets out so you never double-count. Everything on the Month-end accruals panel works this way.
- Non-reversing amortization — a permanent monthly entry that never undoes itself. Each month you move one slice of a prepaid asset into expense, and it stays. This is the Prepaid Register, and it is not an accrual — it never appears in the month-end accrual preview.
What Arcvue proposes as accruals — and what it refuses to guess
The Month-end accruals panel proposes draft entries you review and post; it never posts on its own. It knows five accrual families, but only proposes the ones it can ground in real data — the rest it skips with a reason, on purpose, and lists them under Not proposed:
| Family (panel label) | What it accrues | Status today |
|---|---|---|
| Accrued accounts payable | Approved vendor bills not yet posted | Proposes drafts |
| Payroll accrual | The straddle between pay-period-end and month-end | Held (needs pay-calendar wiring) |
| Prepaid amortization | (label only) — handled on the Prepaid Register instead | Not run here — see Part 3 |
| Unbilled receivables | Revenue earned not yet billed | Held (comes from Revenue Recognition) |
| Subcontractor labor | Approved Subcontractor Portal hours the subcontractor has not invoiced yet, at the rate the person's staffing names: a rate on the subcontract agreement, or a purchase order line | Proposes drafts for a month with approved hours; silent otherwise. Each contract the hours were worked on gets its own debit line, so the cost lands on that contract's profitability. Its explanation names what priced the hours: the agreement, a purchase order line, or both, with a count for each. It skips, and names, any hour it cannot price exactly: a staffing that names no agreement rate and no purchase order line, a rate or line with no GL account, two candidates for the same hour that disagree on price or account, or an hour that does not say where it was worked when the rate depends on it. Two candidates stating the same price and account are not a conflict |
The "held" ones aren't broken — Arcvue refuses to fabricate an accrual it can't compute from a real source. A guessed accrual is worse than none. Each held family names exactly what it's waiting on in its skip reason.
What a prepaid is
A prepaid is a cost you pay up front for something you consume over time — annual insurance, a software license, prepaid rent, prepaid taxes. You paid the whole amount now, but it belongs to expense spread across the months of service, not all in the month you paid. Until it's consumed, a prepaid is an asset on your books. Arcvue amortizes it straight-line — the amount split evenly across the term, tracked to the cent, with the final month absorbing any rounding remainder so the schedule always sums back to exactly what you prepaid.
Part 2 — How to run it
Step 1 — Open Period Close and pick the month
In the left nav, go to Accounting → General Ledger → Period Close (/accounting/close). The page header reads Period Close — "Run the checklist, fix what's flagged, close the books with one click."
The left column is a 12-month timeline of period pills (open, closed, locked). Arcvue pre-selects the oldest open month, which is almost always the month you want to accrue for. Click a different pill only if you mean to work a different month.
Step 2 — Preview the accruals
Scroll the right column past the checklist to the Month-end accruals panel (the small header with the sparkle icon). Click Preview accruals (the outlined button; it reads Working… while it computes).
For accrued accounts payable you get a card showing the family name, the total dollar amount, a preview chip, and a one-line derivation explaining how it was computed (the balanced entry debits each expense account with unposted approved bills and credits your accrued-expenses liability). The held families appear below under a Not proposed header, each with its skip reason — that's expected until their upstream source exists.
Nothing has been written yet. The panel confirms this with "Preview only — use 'Create draft entries' to write them."
If accrued A/P is skipped as ambiguous, it's because your chart has more than one accrued-expenses liability account and none is designated as the control account, so Arcvue won't guess. See Part 3 for the fix.
Step 3 — Create the draft entries
When the preview looks right, click Create draft entries (the teal button with the receipt icon). Arcvue writes the balanced draft journal entry (or entries), each stamped to auto-reverse on the first day of the next period. Created families flip from the gray preview chip to a green chip carrying the assigned entry number; a line reads "Created N drafts — review and post from Journal Entries."
If you click Create draft entries twice, the second run is safe — an already-written accrual shows an already drafted chip with its entry number rather than duplicating.
Step 4 — Review and post the drafts
The created entries are drafts, not posted. Go to Accounting → General Ledger → Journal Entries (/accounting/journal-entries), open each accrual draft, confirm the accounts and amount, and post it. On the first day of the next month the reversal posts automatically, and the real vendor invoices post as usual — the two net out.
Step 5 — (Prepaids only) amortize on the Prepaid Register
Prepaids do not run through Step 2. To set one up, go to Accounting → Assets → Prepaid (/accounting/prepaid). The header reads Prepaid Register — "Prepaid assets amortized straight-line to expense (non-reversing). You enter the schedule; the engine computes each month."
Click + Add prepaid (top right). The form asks for:
- Description — what the prepayment is for (required).
- Vendor — optional.
- Prepaid asset account — the balance-sheet asset the prepayment currently sits in. The dropdown lists your active asset accounts (account number · name).
- Expense account — where each month's slice lands. The dropdown lists your active expense accounts.
- Amount ($) — the total you prepaid.
- Service start — the first month of consumption (defaults to today's date; set it to the month coverage begins).
- Term (months) — how many months to spread it over (must be at least 1; defaults to 12).
Click Create (it reads Saving… briefly, then confirms "Prepaid item created"). Create stays disabled until description, both accounts, an amount, and a term ≥ 1 are all filled. Arcvue then computes the straight-line schedule automatically — there is no separate posting step to start it.
Step 6 — Read the register
Each active prepaid shows as a row with Description (and vendor), Start, Term, Original, This month (this period's amortization), To date (cumulative recognized), and Remaining (the unamortized balance still sitting in the asset). Three tiles across the top roll these up: Active items, This month's amortization, and Unamortized balance. An item drops off the register once it is fully amortized.
To retire a prepaid early — it's canceled, or no longer has value — click Write off on its row. That stops it amortizing and removes it from the active register. There is no confirmation prompt, so click deliberately; clicking it again on an already-written-off item is harmless.
Part 3 — When something looks wrong
| Symptom | What's happening → what to do |
|---|---|
| Accrued A/P shows under "Not proposed" as ambiguous | Your chart has more than one accrued-expenses liability and none is flagged as the control account, so Arcvue won't guess. Designate the account your books actually accrue expenses into (the one with real accrued-expense history — not the cleanest-looking near-duplicate, pending prior-system confirmation) in accounting settings, then re-run Preview accruals. |
| Payroll accrual / Unbilled receivables always skip | By design. Payroll needs the pay calendar wired so it knows the straddle days; unbilled receivables come from the Revenue Recognition engine. Each starts proposing once its source lands. Their skip reason on the Not proposed list names what they're waiting on. |
| Prepaid amortization never appears in the accrual preview | Correct — a prepaid is not an accrual. Amortize it on the Prepaid Register (/accounting/prepaid), not here. |
| I created accruals and next month looks double-counted | Check that the reversal posted on the 1st. Reversing accruals only net out if the auto-reversal fires; if the next-month period was closed or locked when the reversal tried to post, it waits until you reopen. The original draft is never touched in the meantime. |
| "Create draft entries" seems to have done nothing new | You already created them this period — the family shows an already drafted chip with its existing entry number instead of writing a duplicate. Find the draft in Journal Entries. |
| A prepaid shows $0 for "This month" | The period is outside the item's term — before Service start or after the term has fully run off. |
| A prepaid's final month is a few cents off the even split | That's the rounding remainder. Straight-line splits evenly and lets the last month absorb the pennies so the schedule ties back to exactly what you prepaid. |
| I wrote off a prepaid by mistake | Write-off removes it from the active register and stops amortization; re-add it with + Add prepaid if it should still be amortizing. |
One-line summary
Accruals book a cost into the month it belongs to before the paperwork arrives — preview and create draft, auto-reversing entries in the Month-end accruals panel on Period Close, then post them from Journal Entries; prepaids are the non-reversing mirror image, set up and amortized straight-line on the separate Prepaid Register (/accounting/prepaid).
Related
- Close the month these accruals belong to → Close a Month (Period Close)
- Recognize revenue at month-end → Revenue Recognition (same Period Close page)
- Post and review the draft entries → Journal Entries
Also on the Period Close page
The Accruals awaiting a bill panel (see Close a Month, Step 3) carries the decisions on an accrued payable whose bill never came: Link this bill, Re-accrue — with the fields Accrue into, Expense account and Amount — and Close — never coming, which requires the note Why the bill is not coming.