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Prepaid expense is personal account in nature and default normal balance is debit balance and shown under current asset in asset side of balance sheet.
Prepaid Expenses would normally have a debit balance.
Prepaid expenses are the part of nominal account expenses which are not used during the current accounting period. They cannot be charged to profit and loss account as per matching concept. They find place in balance sheet and written off in the next accounting period.
Prepaid insurance is personal nature of account and amount in it is shown as current asset in balance sheet.
1.Intial Step when we pay the prepaid Expenses Prepaid Expenses A/c DR Bank A/C CR 2.Later on adjustment in our books Expenses A/c DR Prepaid Expenses A/C CR
Yes, prepaid expenses should be a nominal account. Prepaid expenses are not assigned to a particular organization, but rather a category.
Prepaid expense is personal account in nature and default normal balance is debit balance and shown under current asset in asset side of balance sheet.
Prepaid Expenses would normally have a debit balance.
Prepaid expenses are the part of nominal account expenses which are not used during the current accounting period. They cannot be charged to profit and loss account as per matching concept. They find place in balance sheet and written off in the next accounting period.
Prepaid insurance is personal nature of account and amount in it is shown as current asset in balance sheet.
1.Intial Step when we pay the prepaid Expenses Prepaid Expenses A/c DR Bank A/C CR 2.Later on adjustment in our books Expenses A/c DR Prepaid Expenses A/C CR
NO! Prepaid expenses are assets!!
No, it is a real/permanent account. Insurance expense is a nominal account.
A prepaid expense is an account that a business might have to pay the traveling expenses of salesmen. The salesmen are given a certain amount for travel each week or month that can be used for meals and hotels and other travel expenses.
A nominal real account represents incomes, gains, expenses, and losses. A personal account represents a person's and organization's expenses.
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.
Decrease in prepaid expenses increases the cash flow because if there is no prepaid expenses already in balance sheet then cash has to be paid to fulfill expenses but as there are prepaid expenses and company save cash that;s why it increases the cash flow.