Deferral templates in Microsoft Dynamics 365 Business Central let you spread an income or expense across several accounting periods instead of posting the full amount at once. You set them up once and apply them to purchase invoices, sales invoices, or directly in a G/L journal.
You control how the amount is distributed using the deferral percentage and the calculation method. A deferral percentage of 100 defers the full amount, while 80 posts 20 percent directly and defers the remaining 80 percent.
You choose between four calculation methods: Straight-Line, Equal per Period, Days per Period, and User-Defined. You also decide whether the deferral starts on the posting date, the beginning of the period, the end of the period, or the beginning of the next period.
The deferred amount accumulates on a balance sheet deferral account, and Business Central releases it to the income statement over the number of periods you specify.
What deferral templates do in Business Central
Deferral templates are normally used in connection with sales and purchases. You can create deferrals on purchase invoices, sales invoices, or directly in a G/L journal. The template holds the rules for how an amount should be spread across periods, so you don’t have to set it up manually every time you post.
Business Central ships with a standard setup you can use for inspiration. From the deferral templates list, you’ll find a template named “12 Periods Straight-Line” that you can open to see how the fields are filled in.
How the deferral percentage works
The deferral percentage decides how much of the amount is deferred. On the standard template, the percentage is set to 100, which means the full amount is deferred when you post with that template.
If you instead set it to 80, then 20 percent is posted directly and the remaining 80 percent is deferred across the periods.
The four calculation methods
You select a calculation method to control how the amount is split between periods:
- Straight-Line: Business Central takes the amount from the starting date to the end date and calculates evenly per period. If you start in the middle of a period, only part of the amount is deferred to that period. The same happens if the deferral ends in the middle of a period, and the periods in between are equal.
- Equal per Period: Every period is deferred with the same amount.
- Days per Period: The amount is deferred according to the number of days in each period. The periods used are the accounting periods.
- User-Defined: You set up the distribution yourself or defer manually.
Setting the start date for the deferral
The starting date of the deferral can be the posting date where you actually post, the beginning of the period, the end of the period, or the beginning of the next period.
For example, if you post something in the middle of April and you have set the start date to the beginning of the period, the deferral will start on the first of April.
The deferral account
The standard setup includes a deferral account, and you can create your own if you prefer. This is the account where the full amount accumulates first, and the deferral is then released from there. It is a balance sheet account holding the deferrals.
If you are deferring income rather than expenses, you can create a separate account for deferred income. The principle is the same.
Number of periods and description text
On the template, you set the number of periods you want to defer over and the standard text to insert on the deferral entries. You can use the placeholders Percentage 4 and Percentage 6 for the month and the year, which are then inserted automatically into the description.
Creating a new deferral template
To create a new template, you give it a code such as “6 Periods” and fill in the fields. As an example, you can set the deferral percentage to 100 to defer the full amount, choose Days per Period as the calculation method, and start from the beginning of the period or the posting date.
You point it to the same deferral account, set the number of periods to 6, and reuse the same period description as on the 12-period template.
Once you have your templates set up, you can select each of them directly in the G/L journals and on the sales and purchase documents you are working with.
Q&A
Where can I apply a deferral template in Business Central?
You can apply deferral templates on purchase invoices, sales invoices, and directly in a G/L journal. You select the template directly on the document or journal line.
What does the deferral percentage do?
It decides how much of the amount is deferred. At 100 percent, the full amount is deferred. At 80 percent, 20 percent is posted directly and 80 percent is deferred across the periods.
What is the difference between the calculation methods?
Straight-Line calculates evenly from the starting date to the end date and prorates partial periods at the start and end. Equal per Period defers the same amount in every period. Days per Period defers based on the number of days in each accounting period. User-Defined lets you set the distribution yourself or defer manually.
What start dates can I choose for a deferral?
You can choose the posting date, the beginning of the period, the end of the period, or the beginning of the next period. For example, posting in mid-April with “beginning of the period” starts the deferral on the first of April.
What is the deferral account used for?
It is a balance sheet account where the full amount accumulates first. The deferral is then released from this account over the chosen periods. You can use separate accounts for deferred expenses and deferred income.
Can I create my own deferral templates?
Yes. You give the template a code, set the deferral percentage, choose a calculation method and start date, point it to a deferral account, and set the number of periods and a description text. You can then select it on journals and documents.