What is Prepaid expense and it's journal entry

Question

Accepted Answer

Prepaid expense is an advance payment made for goods or services that will be received in the future.

Prepaid expenses are considered assets on the balance sheet.
The journal entry for recording a prepaid expense involves debiting the Prepaid Expense account and crediting the Cash or Accounts Payable account.
As the prepaid expense is consumed or utilized, it is gradually recognized as an expense through adjusting entries.
Example: A company pays $1,200 in advance for a 12-month insurance policy. The journal entry would be: Debit Prepaid Insurance $1,200 and Credit Cash $1,200.

Accepted Answer

Prepaid expenses are financial assets paid in advance for future goods or services. Managed for cash flow, product/service security, cost control, and tax benefits. Recorded as current assets in balance sheet, journal entries include asset and expense methods. Examples include rent, insurance premiums.

What is Prepaid expense and it's journal entry

Top Carisma Solutions Senior Accountant interview questions & answers

Popular interview questions of Senior Accountant

Top HR questions asked in Carisma Solutions Senior Accountant