Bookkeeping Entry for Level Payment Plans

by John Bass
(Jopliin MO USA)

How do I make entry for utilities that have you on level payment plans?

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Hi John,

I'm not certain what a level payment plan is ... but I'm guessing it is similar to a budget payment plan where your useage is estimated ... and payments are spread out over eleven months ... with a settling of the account to actuals occuring once a year.

The approach, for me, depends on the size and materiality of the entry.

If the amounts aren't material, I would just book your payment plan every month as an expense. At year-end I would review the utility account and book an accrual if the account and/or balance needs to be adjusted.

If the amount is significant, I would book the actual useage billed each month through accounts payable ... then only reduce the payable each month by your budget amount.

Under this scenario, you are booking your actual utility expenses. Any overage and/or underage will sit on your balance sheet in accounts payable.

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