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:

Prepaid expenses may need to be adjusted at the end of the accounting period. The adjusting entry for prepaid expense depends upon the journal entry made when it was initially recorded. There are two ways of recording prepayments: (1) the asset method, and (2) the expense method.

You can easily log prepaid expenses, including cost centers, taxes, and descriptions, ensuring these transactions are automatically reflected in journal entries, reducing manual effort and errors.

Prepaid expenses, or Prepaid Assets as they are commonly referred to in general accounting, are recognized on the balance sheet as an asset. A “prepaid asset” is the result of a prepaid expense being recorded on the balance sheet.