Journal Entry for Prepaid Expense

Prepaid expenses are those expenses which are paid in advance by the company. The benefits of such expenses are not received by the company and therefore they are recorded as asset in the balance sheet. Examples of prepaid expense are prepaid rent, prepaid insurance etc… Given below is the journal entry which is passed for recording prepaid expense into the books of accounts of a company –

Prepaid expense account Dr

To cash account

(When the company pays prepaid expense this journal entry will be passed)

After making the above journal entry another journal entry will be made at the end of period for adjustment of prepaid expense –

Expense account Dr

To Prepaid expense account

(This entry is passed for adjustment purpose, by debiting the relevant expense when it become due account and transferring balance to the prepaid expense account under asset side of balance sheet.)

9 comments… add one
  • poonam patel

    helpfulll to a large extent

  • rajkumar Jaiswal

    very nice

  • Vinay Chaganti

    Thanks Boss. You just made my day better. 🙂

  • kasif iqbal

    My Question is how i’ll make the journal entry for below information.
    Year end is 31st,Dec,2012. and we paid rent on 1st Sep,2012 for the period from Sep,2012 to Aug,2013 are as follow.
    on 1st Sep,2012 we paid rent from petty cash for 6 Months.
    and issued the PDC(1st March,2013) for remaining 6 Months.
    what’ll be Journal entry for all since the Year end is 31st dec,2012.
    Please let me know ASAP it’ll be Highly Appreciable.

    • Vinish Parikh

      Since you have to make journal entry up to 31st DEC 2012, prepaid rent will be of 8 months, then only 4 months rent will be adjusted in the current year (assuming you have paid rent at the beginning of September 2012), and as far as PDC is concerned 2 entries will be passed
      1. Prepaid rent account Dr to PDC Payable
      2. PDC payable Debit to Bank account(When PDC is encashed)

  • kasif iqbal

    but i am more concern abut first 6 months.
    what entries i have to pass for first 6 months since i already paid by petty cash.

  • kasif iqbal

    the Transaction which i pass on 31st sep,2012
    Rent A/c Dr(4 months)
    To petty cash a/c

    than on 31 sep,2012
    prepaid rent a/c dr
    To petty cash a/c
    To PDC a/c

    and when PDC will hit the bank..
    PDC a/c Dr
    To bank A/c

    please check and let me know whether its correct or not.

    • Vinish Parikh

      Ya, it is correct and at the end of period adjusting entry as i mentioned in my post will be passed

  • kasif iqbal

    which mean on the end of Aug,2013 below enry need to pass
    Expense account Dr
    To Prepaid expense account

Leave a Comment


Related pages


prepayments journal entrycost of deflationwhat is the difference between direct and indirect laborwhat is unearned revenue in accountingadvantages and disadvantages of fifowhich of these is an example of indirect taxhorizontal mergerprepaid exptypes of factoring servicesprice skimming focuses on selling products toadvantages globalisationdifference between term loan and overdraftdiscounted cash flow advantagesadvantages and disadvantages of mergers and takeoversnon diversifiable riskmonopolistic competitive market examplesdrawbacks of advertisingexamples of consumer durablesskimming pricing strategiesadvantages of traditional economic systemmutual funds advantages disadvantagesdirect and indirect quotation for exchange ratesnormal and inferior goodsdefine conglomerate in economicsmeaning of skimming pricinglifo methodtypes of monopolistic competitionglobalization in the caribbean advantages and disadvantagesinternational trade disadvantagesexample of vertical mergerlimitations of absorption costingunearned revenue adjusting entrywhat is a conglomerate mergermateriality concept examplehow to calculate crr and slrwhat is substitution effect in economicstypes of leverage in financial managementadvantages of process costingdifferentiate between trade discount and cash discountmerit and demerits of internetbanking advantages and disadvantagesskimming the marketadvantages of a mixed economydematerialisation of shares pptdisadvantages of rural areasadvantages and disadvantages of lifo methodvertical merger examplescharacteristics of authoritarian leadership stylecarriage inward meaningcentrally planned economy definitionfull form slrrrbs bankwhat is bartering systemvostrosfund flow statement definitionoperative expensessubvention meaningnet worth calculation formula for a companyconcept of diminishing returnsadvantages of authoritarian leadership stylefull form of tallystrap option strategywhich of the following is a disadvantage of decentralization3 golden rules of accountingcash in flowpros and cons of mixed economyoperating profit ratio analysisexamples of mixed economieswhat is profitability ratioadvantages and disadvantages of break evenoligopoly disadvantageswhat is an autocratic leadership stylejunk bonds advantagesdisadvantages of a joint ventureglobalization benefits and drawbacksdiscounting bill of exchangevertical merger examplesexamples of securitizationadvantages of a traditional economyfeature of monopolistic competition