The journal entry for prepaid expenses involves two accounts: prepaid expense a/c and expense a/c. Learn how to account for them and create a Prepaid Expenses Journal Entry!

Prepaid expenses are payments made in advance for goods or services to be received in the future. These are considered assets until the benefit of the payment is realized over time, at which point they are expensed. Below are some examples of journal entries for prepaid expenses:

A full guide on accounting for prepaid expenses including journal entries and amortization schedules for leases, subscriptions, and insurance.

The initial journal entry for prepaid rent is a debit to prepaid rent and a credit to cash. These are both asset accounts and do not increase or decrease a company’s balance sheet. Recall that prepaid expenses are considered an asset because they provide future economic benefits to the company.

Create a prepaid expenses journal entry in your books at the time of purchase, before using the good or service. Before diving into the wonderful world of journal entries, you need to understand how each main account is affected by debits and credits .