What is the entry of prepaid expense in GL

Question

Accepted Answer

Prepaid expenses are recorded as an asset in the general ledger (GL).

Prepaid expenses are expenses paid in advance but not yet incurred.
They are recorded as an asset because they represent future economic benefits.
The entry in the GL is a debit to the prepaid expense account and a credit to the cash or accounts payable account.
As the prepaid expense is gradually incurred, it is recognized as an expense and the prepaid expense account is reduced.
For example, if a company pays $1,200 in advance for a 12-month insurance policy, the entry would be a debit to the prepaid insurance account and a credit to the cash account.

Accepted Answer

debit the Prepaid Expense account to show an increase in assets. And, credit the Cash account to show the loss of cash.

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