An
expense which is paid before its due date is called prepaid expense. For
example: Prepaid Insurance, Prepaid rent,
A type of plus that arises on a balance sheet as a results of business making payments for goods and services to be received in the close to future. whereas postpaid expenses ar at the start recorded as assets, their worth is expensed over time because the profit is received onto the profit-and-loss statement, as a result of unlike conventional expenses, the business can receive something of import within the close to future.
At the top of the accounting amount, there may be expenses that are paid before. These ar expenses that ar paid before and would be adjusted within the relevant expenditure throughout the subsequent accounting periods.
Advances paid ar treated in a totally different manner from expenses prepaid, the distinction being that the advances ar redeemable whereas expenditure prepaid ar something by adjusted them within the amounts to be paid within the future towards the expenditure.
Prepaid expense is expense paid before but that has not yet been incurred.
Expense should be recorded within the accounting amount during which it's incurred. Therefore, postpaid expense should be not be shown as expense within the accounting amount during which it's paid however instead it should be bestowed intrinsically within the subsequent accounting periods during which the services in respect of the postpaid expense are performed.
Entity ought to so acknowledge associate plus in respect of expense it's paid in advance until such time because the services that ar due in relevance the prepaid expense are performed by the suppliers/contractors. Following accounting entry is needed to account for the prepaid expense:
Cash A/c Cr
A type of plus that arises on a balance sheet as a results of business making payments for goods and services to be received in the close to future. whereas postpaid expenses ar at the start recorded as assets, their worth is expensed over time because the profit is received onto the profit-and-loss statement, as a result of unlike conventional expenses, the business can receive something of import within the close to future.
At the top of the accounting amount, there may be expenses that are paid before. These ar expenses that ar paid before and would be adjusted within the relevant expenditure throughout the subsequent accounting periods.
Advances paid ar treated in a totally different manner from expenses prepaid, the distinction being that the advances ar redeemable whereas expenditure prepaid ar something by adjusted them within the amounts to be paid within the future towards the expenditure.
Prepaid expense is expense paid before but that has not yet been incurred.
Expense should be recorded within the accounting amount during which it's incurred. Therefore, postpaid expense should be not be shown as expense within the accounting amount during which it's paid however instead it should be bestowed intrinsically within the subsequent accounting periods during which the services in respect of the postpaid expense are performed.
Entity ought to so acknowledge associate plus in respect of expense it's paid in advance until such time because the services that ar due in relevance the prepaid expense are performed by the suppliers/contractors. Following accounting entry is needed to account for the prepaid expense:
DebitPrepaid Expense (Asset)
CreditCash
DebitPrepaid Expense (Asset)
CreditCash
Prepaid Expense (Assets) A/c DrCash A/c Cr
DebitPrepaid Expense (Asset)
CreditCash
DebitPrepaid Expense (Asset)
CreditCash
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