prepaid exps

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Querist : Anonymous (Querist)

20 April 2010 how to book the prepaid expenses & what is the procedure?

Aditya Maheshwari

Aditya Maheshwari (Expert)
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20 April 2010 Prepaid expenditure can be defined as the portion of a payment that relates to the value of services to be received in future accounting periods which will gradually expire or be used up over time. The assessment of prepaid expenditure is an important requirement of accrual accounting. Prepaid expenditure is included as an asset in the financial statements prepared by an entity.

CA.TAPAS DALAR

CA.TAPAS DALAR (Expert)
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20 April 2010 Agreeing with Aditya. Apart from the above,

prepaid expenses account Dr.

Cash/Bank Account Cr.

Prepaid expenses to be shown under Current Assets, loans and advances in the asset side

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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20 April 2010 AGREED WITH EXPERTS.
BUT CORRECT ENTRY WILL BE

EXPENSE HEAD DR (Related to CY)
Prepaid Expenses Dr (Related to Next year)
To Bank/ Cash.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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20 April 2010 Yes all above are correct. If entire amount paid prepaid then entry as per Tapas. If part for this year and part for next year then as per B. K. Bansal.