Generally, the amount of prepaid expenses that will be used up within one year are reported on a company’s balance sheet as a current asset. As the amount expires, the current asset is reduced and the amount of the reduction is reported as an expense on the income statement. Example of...
As the prepaid expense is used up, it must be recognized in the income statement under the relevant expense category. These are the journal entries used to represent the realization of the prepaid expenses: Debit: Expense Account Credit: Prepaid Expense Account (Asset) Common examples of ...
What kind of accounts are prepaid expenses and unearned revenues? What type of account is retained earnings? What is unearned revenue? Who gets it? And why is it unearned? What is the difference between unearned revenue and accrued revenue?
Anything that has economic value to a business is considered an asset. Prepaid expenses are considered a prepaid asset because the item that is paid for in advance, such as the rent or insurance coverage, has monetary value. Prepaid expenses are also considered a current asset because they can...
Definition:A prepaid expense is the prepayment of services before they are received. In other words, it’s a resource that is paid for in advance of actually receiving the resource. What Does Prepaid Expenses Mean? Contents[show] Since the matching principles requires that all expenses be matche...
What Are Prepaid Expenses? A prepaid expense (also known as prepayment) is a payment made in advance for an expense that hasn’t occurred yet. But what does it mean for an expense to occur? On the accrualbasis of accounting, expenses get recognized when they are used, consumed, utilized,...
Learn about what prepaid expenses are, and how they can affect your business in the future. Find out more accounting terms in the QuickBooks' Glossary.
Prepaid Expenses:This type of current asset is an expense that is paid for in advance but hasn't occurred yet, such as rent. Inventory:This category includesraw materialsand finished goods that can be sold relatively quickly. Companies should maintain a consistent level of inventory to run ...
Current assets generally fall under one of six sub-accounts in the Current Assets account: Cash and Cash Equivalents, Inventory, Accounts Receivable, Marketable Securities, Prepaid Expenses, and Other Liquid Assets. However, other current asset accounts are specific to industries and businesses, such ...
Debit $1904 to “Prepaid Expenses – Subscription”. Credit $1904 to “Cash”. For more on debits and credits, please consult “What Is a Debit and Credit?”