July 26, 2021 - by Mark Wilsdorf
If you file taxes on a cash basis as most farmers and ranchers do, and you've had a good income year, late-in-the-year tax planning may suggest that you should increase deductible expenses for the year to keep from paying an excessive amount of income taxes. One way to do that is to prepay for some supplies; that is, pay ahead of time (in the current tax year) for fertilizer, feed, seed, fuel, etc. which you won't take delivery of until sometime in the next tax year.
Fortunately, recording something as both an expense and an asset is easier than you might think. Let's consider an example based on prepaying for fertilizer. We will look at how to enter the check first, then follow up with information about setting up the necessary accounts, and other details.
The example is based on the QuickBooks desktop editions (Pro, Premier, Accountant, and Enterprise). The same approach should work in the QuickBooks Online editions—though I have not specifically tested it there, this time—but the terminology and screen appearance will of course be different.
Note: The steps shown in this article work for any kind of prepaid expenses, not just fertilizer.
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