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


venture capital advantages and disadvantageswhat is leverage ratiosassumptions of capmprepaid expenses journal entry examplediversifiable risk and nondiversifiable riskdistinction between micro and macro economicsincome method to calculate national incomewhat is mixed economiesdifference between direct cost and indirect cost with examplebank loan and bank overdraftadvantages of payback methodmixed economies advantages and disadvantageslong term sources of finance advantages and disadvantagesadvantages and disadvantages of globalizationdisadvantages of perfect competitionmeaning of wholesaler and retaileradvantages of performance based budgetingdefine draweedisadvantages of traditional economypenetration pricing exampleexamples of current liabilities on a balance sheetdifference between overdraft and term loanwhat are the advantages and disadvantages of a mixed economytrade discount accounting entrywhat is oligopoly and monopolycarriage on sales in trading accountmoil ipoadvantages and disadvantages of job productionthe fifo methodtypes of liquidity ratiodefine consignee and consignorexamples of current liabilities in accountingdirect expenses and indirect expensesrent receivable journal entryadvantages and disadvantages of traditional economyprepaid rent balance sheetfdi and fii definitionpayment received in advance journal entryconcept of bookkeepingprofitability ratios typesunearned revenue on balance sheetdisadvantages of transfer pricingdisadvantage of capitalismbill discounting meaningindirect quote exchange rateipo full formcapital turnover ratio calculationdisadvantages of foreign direct investmentadvantages of a centrally planned economyconsignee definewhat does the word consignment meanconglomerate integrationdirect investment advantages and disadvantagesadvance payment journal entryfinancial market segmentationcontingent liabilities exampleswhat are the characteristics of monopolistic competitiondefinition of consignorwhat is full form of ipoexamples of securitizationbalance sheet investopediaconglomerate diversification examplesbenefits of jit manufacturingwhat is an unqualified audit opinioncompetition based pricing advantages and disadvantagesdefine fictitious assetstariffs vs quotaswhat is vertical analysis of financial statementsthe disadvantages of socialismgold bullion standard definitiondefinition subventionthe income and substitution effects of a price change explainpros and cons of mergers and acquisitionsppf advantagestypes of price elasticity of demand with diagram