prepaid expenses

Deferred Charge

An asset on a balance sheet that comes about from a business making payment for a good or service it has not yet received, but will in the near future. Prepaid expenses are expensed over time as the goods or services are received. A common example of a prepaid expense is an insurance policy. Another example is a lump sum payment for rent; if a company pays for a year's worth of rent in advance, it is recorded as a deferred charge. A deferred charge is also called a prepaid expense.

prepaid expenses

Expenses that represent goods or services delivered over a period of time,but which are paid in a lump sum at the beginning of that time period.If one paid $12,000 for an insurance premium on property for one year,that $12,000 would be entered on the accounting records as a $12,000 asset called prepaid insurance expense.Each month the property owner would reduce the asset account by $1,000 and show a corresponding $1,000 expense for that month for insurance. At the end of the year,the prepaid expense account would be $0 and the books and records would show $12,000 worth of total insurance expenses.When conducting the due diligence to purchase an income-producing property,the potential buyer should inquire about the handling of expenses for which the seller receives bills only a few times a year.Sometimes,such expenses never show up on the monthly profit and loss statements, but are artificially placed in something called the thirteenth month accounting period.

Prepaid Expenses

Prepaid expenses are expenses that are paid in advance. Cash-basis as well as accrual-basis taxpayers usually are required to capitalize prepayments for rent, insurance, etc. that cover more than one year. Deductions are taken for the period during which the benefits are received.
References in periodicals archive ?
AMC's acquisition included the acquisition of accounts receivable, inventory, prepaid expenses, and machinery and equipment.
The acquisition of Indiana Transport included the acquisition of accounts receivable, prepaid expenses, machinery and equipment, and real estate and was funded under the company's existing credit facility.
The assets to be acquired include property, plant and equipment, intellectual property and certain working capital assets (inventory and prepaid expenses less current liabilities) and exclude accounts receivable.
Statement of Consolidated Financial Position Assets: Cash & Cash Equivalents $1,459,916 Investments at Fair Market Value 2,566,396 Accounts Receivable 6,348 Prepaid Expenses 67,060 Fixed Assets 38,658 Deposits 8.
960 Accounts receivable, net 284 173 Other receivables 322 323 Receivable - affiliates 36 83 Prepaid expenses and other 625 532 Total current assets 12.
STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2012 AND 2011 ASSETS 2012 2011 CURRENT ASSETS: Cash--checking $67,644 $29,659 Cash--savings and money market 56,276 55,809 Accounts receivable 12,618 11,967 Receivable--ISNAP program 70,591 77,391 Certificates of deposit - 125,000 Prepaid expenses 12.
But differences between the cash basis and accrual basis for expense recognition purposes are represented by amounts in accounts such as prepaid expenses (payment before expenses are incurred) and various accrued or payable accounts (payment after expenses are incurred).
0 million of cash in the escrow account, which is classified as prepaid expenses in the consolidated balance sheet as of April 30, 2012.
If member states choose to apply the measure, very small businesses may therefore be exempted from the obligation to keep accounts on prepaid expenses and prepaid income for certain headings, thus reducing accounting information to key elements and ensuring a minimum level of transparency.
Request for Accounting Method Change for Prepaid Expenses Denied
The prepaid expenses include administrative and marketing expenses, operational expenses, also some taxes and non-tax payments, charitable contributions.