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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.

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.
Copyright © 2008 H&R Block. All Rights Reserved. Reproduced with permission from H&R Block Glossary
References in periodicals archive ?
At June 30, 2019 the Company had cash on deposit in the amount of $931,204, accounts receivable of $1,430,769, prepaid expenses of $174,615 and inventory of $5,404,788 compared to cash on deposit in the amount of $1,246,244, accounts receivable of $1,224,235, prepaid expenses of $110,258 and inventory of $3,668,401 at December 31, 2018.
Prepaid expenses and other assets increased USD 24.5 million, or 24.9%, to USD 123.0 million at March 31, 2019 from USD 98.5 million at December 31, 2018.
These amounts were included in 'Prepaid expenses and other assets' and 'Accrual expenses and other liabilities,' respectively.
The acquisition of LaSalle Bristol includes the acquisition of accounts receivable, inventory, prepaid expenses, real estate, and machinery and equipment, and was funded under the company's credit facility.
2017 ASSETS Assets: Cash and cash equivalents $ 243,414 Restricted cash 3,794 Investments in marketable securities 4,894,066 Accounts receivable 97,332 Inventory 26,230 Prepaid expenses and other assets 244,075 Property and equipment, net of accumulated depreciation 1,631,624 TOTAL ASSETS $ 7,140,535 LIABILITIES AND NET ASSETS Liabilities: Accounts payable and other liabilities!
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.
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).
ASSETS Current Assets Cash and cash equivalents $155,716 Investments 6,843,823 Accounts receivable 34,019 Inventory 99,252 Prepaid expenses 16,414 Deposits 5,535 Total Current Assets 7,154,759 Non-Current Assets Equipment, net of accumulated depreciation 17,453 Total Assets $7,172,212 LIABILITIES Accounts payable $43,612 Accrued vacation 46,470 Funds held in trust for other organizations 254,188 Unearned membership fees 274,804 Other deferred revenues 13,347 Total Liabilities 632,421 NET ASSETS Unrestricted 6,539,791 Total Liabilities and Net Assets $7,172,212 Statement of Activities for the Year Ended December 31, 2011.
There still remains $5.0 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.