Dr. Prepaid expence (balance sheet)
Cr. Expense (income statement)
e.g. you have already paid $1200 insurance, but at year end still have six months to go until you have to renew your premium.
You would have expensed the full $1200 - now you need to remove the unused (prepaid) portion.
Dr. Prepaid expense $600
Cr. Insurance $600
debit prepaid expenses
credit cash
Debit prepaid inventoryCredit cash / bank
Prepaids and accruals. prepaid: the payment is made but the expense has not yet incurred. accrual: expense happened but not yet making payment. to illustrate how adjusting works, let's see an example: http://www.accounting7.com/content/exercise-adjusting-account-entries-accounting
Prepaid expense is a payment which relevant to services which expected to delivered in the next accounting period, while advance expense is an expense paid in advance for services expected to delivered in the current accounting period.
prepaid expenses are those expenses for which cash is paid in advance but if there is no cash payment then that is not prepaid expense and hence no entry required.
Dr: Prepayment to Suppliers (In Case of Expense, then "Prepaid expense" account will be debited e:g Prepaid Rent) Cr: Bank/Cash
Debit prepaid inventoryCredit cash / bank
prepaid expense adjusting entries
Prepaids and accruals. prepaid: the payment is made but the expense has not yet incurred. accrual: expense happened but not yet making payment. to illustrate how adjusting works, let's see an example: http://www.accounting7.com/content/exercise-adjusting-account-entries-accounting
Adjustment of accrued expenses means to adjust the previously recorded accruals like prepaid expenses or outstanding liabilities etc.
Prepaid expense is a payment which relevant to services which expected to delivered in the next accounting period, while advance expense is an expense paid in advance for services expected to delivered in the current accounting period.
debit prepaid expensescredit cash
prepaid expenses are those expenses for which cash is paid in advance but if there is no cash payment then that is not prepaid expense and hence no entry required.
A journal entry for prepaid expenses involves debiting the prepaid expense account to recognize the asset acquired, and crediting the cash or bank account to show the payment made. Over time, the prepaid expense is gradually recognized as an expense through adjusting entries by debiting the relevant expense account and crediting the prepaid expense account. This process ensures that expenses are matched with the revenues they help generate.
[Debit] Prepaid Expenses xxxx [Credit] Cash / bank xxxx
Debit prepaid expensesCredit cash / bank
Dr: Prepayment to Suppliers (In Case of Expense, then "Prepaid expense" account will be debited e:g Prepaid Rent) Cr: Bank/Cash
Debit prepaid expensesCredit cash / bank