#PREPAID EXPENSES PDF#
#PREPAID EXPENSES REGISTRATION#

Prepaid expenses are shown in the assets section.

The expenses would occur in one fiscal year, and the related revenues would occur in another. Prepaid expenses are expenses paid for in advance and recorded as assets before they are used or consumed. Example: Printing and postage expenses incurred in June for a continuing education meeting to be presented in July.

#PREPAID EXPENSES REGISTRATION#

Example: A registration fee is paid and an airline ticket is purchased in June for a conference in July.Ī good or service which is consumed during the current fiscal year (even though it is for a program which will generate revenues in the next fiscal year), and the charge cannot be refunded, should not be considered as a prepaid expense. Individual payments regardless of the amount, except annual contractual payments, for services paid in advance for the next fiscal year should be recorded as a prepaid expense. The charge should be prorated 2/12 maintenance agreement expense $6,000 and 10/12 prepaid expense $30,000. Then the charge should be prorated between fiscal years.Įxample: A five-year maintenance agreement with an annual payment is due May 1 for $36,000.The total charge is greater than $25,000.the end of the taxable year following the taxable year in which the payment is made. The charge is incurred during the last two months of the fiscal year (May and June) and The 12-month rule allows for the deduction of a prepaid expense in the current year if the right or benefit paid for does not extend beyond the earlier of: 12 monthsfrom the date the prepayment is made, or.Services straddle the fiscal year-end and.Payment is for services (contract and agreements) that exceed more than one year and.Examples of prepaid expenses are rent, insurance, subscriptions, airline tickets, registrations and maintenance agreements.Ī payment should be prorated between fiscal years if it meets the following criteria:

#PREPAID EXPENSES PDF#

The balance that remains is reported as an asset in GL Code 1510 'Prepaid Expenses' until consumed or used.Ĭlick here if you would like to print a PDF Version of this document.Procurement Policies and Procedures Disbursementsĭisbursements made prior to the end of the fiscal year for advance payment of delivery of goods and the performance of services in the next fiscal year is reported as prepaid expenses. Refer to Subsection 85.65.50.b for an illustrative entry. The portion of supplies or services consumed or used during a period is recorded as an expense. Refer to Subsection 85.65.50.a for an illustrative entry. Prepaid expenses are recorded as assets in proprietary and trust fund type accounts.

Under the purchases method, prepaid expenses are treated as expenditures when purchased rather than accounted for as an asset. Prepaid expenses are advance payments made for economic benefit that is to be received or completely consumed only after balance sheet date, it requiring. In governmental fund type accounts, prepaid expenses are generally accounted for using the purchases method. In Washington, because goods and services generally must be received prior to payment, prepaid expenses will be limited.Įxamples of prepaid expenses that may be acquired include insurance, maintenance services contracts, Washington State Good to Go toll accounts, and postage, books, and periodicals.

Prepaid expenses are those certain types of supplies and/or services (not inventory) that are acquired or purchased during an accounting period but not used or consumed during that accounting period.