why Prepaid Expense is treated as an asset & what will be
its journal entry using golden rules of accounting.
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Answer / h.r. sreepada bhagi
Amount paid in advance in an accounting period for a service
to be received in a future accounting period is Prepaid
Advance. Since payee owes money or moneys worth (service) as
on the date of Balance Sheet at the end of that accounting
period, it's an asset.
When payment is made for future expense in advance the
entry is to :-
Debit Prepaid Expenses A/c, and
Credit Bank or Cash A/c.
In the future accounting period to which the expenses
relates, the entry will be :-
Debit Expenses A/c, and
Credit Prepaid Expenses A/c.
| Is This Answer Correct ? | 7 Yes | 2 No |
Answer / sanj
Prepaid expenses is the expenses paid in advance for the
next year.Currently we are accounting current profit and
losses. The services agaisnt this payment will be in next
year so payment of this should be counted in next year.
| Is This Answer Correct ? | 2 Yes | 0 No |
Answer / govinda_mahato05
Prepaid expenses is the expenses for which we paid the money in advance for that expense. But actually this expenses will not have occurred at the time of payment. However this prepaid expenses adjust at the time of happening this expenses in actual.
| Is This Answer Correct ? | 0 Yes | 0 No |
Answer / shamim
because this exp has to pay in advance but did not get
service from whom pay the money thats y it is current asset
Exp a/c dr
prepaid exp. a/c
| Is This Answer Correct ? | 4 Yes | 7 No |
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