Plz guide me whether Annual Membership fees of any organisation will be traeted as perpaid exepenses or normal expenses.Suppose Annual Membership fess for 2016-2017 paid on feb 2016, so total amount paid regarding above said matter will be treated as prepaid expenses or normal expenses.
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A/c treatment of preapaid expenses
Replies (5)
must be biferecate as prepaid exp
feb and march exp should be treated as current years exps
and remaining as prepaid exps.
just like we treat insurace payment or subscripttion payment
Sir,
Please note that prepaid and normal expenses is decided on the basis of the period for which it pertains. e.g. If Expenses is for 01/04/2015 to 31/03/2016 then it should be treated as normal Expenses for FY 215-16 but if the same is for 01/06/2015 to 31/05/2016, then for 01/06/2015 to 31/03/2016 should be taken as normal expenses i.e. current year expenses & Balance for 01/04/2016 to 31/05/2016 should be taken as Prepaid expenses. Please note that the payment should be made in Current Year. for expense to be treated as Prepaid Expenses.
Hope it helps you.
Regards.
Depends upon which accounting method is adopted by you. In case of cash method, no need to bifurcate the expense in prepaid and postpaid. In case mercantile method you should bifurcate the expense.
We are following accural system that membership fees is not related to genartion any assets can it be feasible to charge to the preapid expenses or it will charge to normal expenditure.
Feb and March can be treated as current year and rest can be treated as prepaid expenses
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