Advance expenses entry

Assuming that you follow mercantile system of accounting, advance paid will appear under current assets in the balance sheet.

As and when the expense is incurred, debit the expense to P&L and credit the asset account.

1. When advance payment is made, debit pre-paid expense and credit bank.

2. When actual expense is incurred, debit expense credit pre-paid expense.

3.The entry debiting pre-paid expense and crediting expense is wrong.  Probably, this entry may be needed, only if, by mistake, when advance is made, expense was debited instead of pre-paid expense. It is a case of rectification entry.

When the payment is made:

Prepaid expense (or vendor account) Dr

To Bank

When expense is accounted:

Expense Dr

To Prepaid expense (or vendor account)