Deferred Property Tax
A financial professional processing annual property tax ($12,000, paid in three installments) in Sage 300 debited 'Accrued Property Tax' (G/L 2450) and credited 'Accounts Payable' (G/L 2100) for each of the three invoices, resulting in a debit balance in account 2450, inconsistent with the credit balance expected for a liability. The article discusses why the expense cannot be directly recorded to an expense account, whether the deferred amount should be transferred monthly to property tax expense, and seeks peer advice.
I have been going rounds with this and need some help to make sure that my books are accurate. For simplicity's sake, my yearly property tax bill is 12k. Our state allows us to pay in 3 installments, which we do. This bill was entered as 3 separate invoices in Sage 300, which resulted in a DR to Accrued Property Tax (G/L 2450) and CR to Accounts Payable (G/L 2100). So now the 2450 account has a debit balance, which is not correct. This liability account should show a credit balance of 12k. I can't change the default account that AP invoices go to for this particular instance, nor do I think that is a wise move. If the bills had been coded to Property Tax Expense, that would over-inflate the expense account so that doesn't seem viable. I should be expensing the deferment to the Property Tax Expense account each month, right? So hence my dilemma and why I am seeking input from anyone who has some insight on this situation. Thank you in advance for your help!