Journal Entry for Prepaid Expense
Prepaid Expense (asset) a/c dr 10000
To Party/Vendor a/c 10000
(Booing prepaid expense in books)
Party/Vendor a/c dr 10000
To bank a/c 10000
(being payment made to vendor)
Expense a/c dr 1000
To Prepaid Exp a/c 1000
(being amortizing prepaid exp on monthly/quarterly basis etc)
The above example shows that while accounting the expense entry the balance in prepaid expense will reduce by 1000 and the balance will be only 9000. At the end of the 10th month there will be no balance in the prepaid account and everything will be accounted as expenses.
Prepaid Expense (asset) a/c dr 10000
To Party/Vendor a/c 10000
(Booing prepaid expense in books)
Party/Vendor a/c dr 10000
To bank a/c 10000
(being payment made to vendor)
Expense a/c dr 1000
To Prepaid Exp a/c 1000
(being amortizing prepaid exp on monthly/quarterly basis etc)
The above example shows that while accounting the expense entry the balance in prepaid expense will reduce by 1000 and the balance will be only 9000. At the end of the 10th month there will be no balance in the prepaid account and everything will be accounted as expenses.
