Prepaid is debited in journal entry and is shown in assets side of balance sheet. Following accounting entry will be recorded in the year 2011: XYZ LTD has a year end of 31st December 2011. However, the organization may not receive the benefits from these expenses by the end of the current accounting year. Step 1. Following the three examples for the types of prepaid expenses above, the accounting entries at the time of making … The following list shows common prepaid expenses examples: Rent (paying for a commercial space before using it) Small business insurance policies Equipment you pay for before use Salaries (unless you run payroll in arrears) Estimated taxes Some utility bills Interest expenses Journal Entry for Salary Paid in Advance Salary paid in advance is also known as prepaid salary (it is a prepaid expense). Payment was scheduled to be made in advance by no later than 25th December 2011. Suppose Company A has purchased Consulting Services from another Company B and makes the payment for the Fees for the same of 1 lac per year for the next 5 Years. Prepaid expenses are the amount of the expenses of which has been paid in advance by one person to another, but the benefit of the same is not yet received. In the present case, the company X ltd. paid the full rent and insurance amount of the 12 months at one time in the beginning. It signed an agreement with Mr. Y to take the property on rent for one year. The prepaid insurance is an asset of … Following accounting entry is required to account for the prepaid expense:eval(ez_write_tag([[300,250],'accounting_simplified_com-medrectangle-4','ezslot_1',108,'0','0'])); ABC LTD pays advance rent to its landowner of $10,000 on 31st December 2010 in respect of office rent for the following year. The Journal entry to record prepaid expenses is: Date: Particulars: Amount (Dr.) Amount (Cr.) Prepaid is debited in journal entry and is shown in assets side of balance sheet. So in this transaction, we will … In accordance with the matching principle, the advance payment is not recorded as an expense at the time of payment because it relates to future expenses.It is recorded as an asset initially and written-off as expense through an adjusting entry when the expense is actually incurred.. … Prepaid expenses are those expenses which are paid in advance for a benefit yet to be received. Prepaid Expense A/C: Debit: Debit the increase in asset To Expense A/C: Credit: Credit the decrease in expense: Payment for “insurance premium” is commonly issued in advance hence it will be used to explain the treatment of prepaid expenses in final accounts (or) financial statements. The company can make prepaid expense journal entry by debiting prepaid expense account and crediting cash account. Sample Prepaid Expenses Template Following accounting entry will be recorded in the books of ABC LTD in the year 2010: The prepaid expense will be recognized as expense in the next accounting period to which the rental expense relates. Prepaid Expense Entries. The company will initially record the amount paid as the prepaid expense at the time of payment of money and adjust it subsequently every month for the next 12 months as its expense once the amount gets due. Prepaid rent journal entry On the date the company makes advance payment for rent, it can make the prepaid rent journal entry by debiting prepaid rent account and crediting cash account. It may so … Prepaids are ether prepaid revenues or prepaid expenses, and accruals are either accrued revenues or accrued expenses. Prepaid Expense means Expense of future year incurred in current year Example Suppose expense of whole year of 12000 paid together together at one time In this case,amount of prepaid depends upon type of closing TYPE OF CLOSING AMOUNT OF PREPAID Monthly Closing 11 month expense is Prepaid (12000*11/12=11000) … At the end of the month, the company usually make journal entry by debiting rent expense account and crediting prepaid rent account to recognize the expense for the rental facility that the company has used for the period. Bookkeeping Guidebook The journal entry has nothing to do with allowability/non allowability of expenses for IT purpose. In the normal course of business, some of the expenses may be paid in advance. The date when the rent expense and insurance expense is paid for the whole year:  January 01, 2019. Therefore, prepaid expense must be not be shown as expense in the accounting period in which it is paid but instead it must be presented as such in the subsequent accounting periods in which the services in respect of the prepaid expense have been performed. The journal entries for prepaid rent are as... 2. He loves to cycle, sketch, and learn new things in his spare time. Prepaid Expense Entries. Journal Entry for Prepaid Expense. Companies use adjusting entries at the end of an accounting period to adjust prepaid expenses and record the expenses incurred. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. Prepaid expense is expense paid in advance but which has not yet been incurred. Accounting Entries for Prepaid Expenses and Subsequent Amortization. Once approved, you notify the supplier that you are ready to enter the agreement. helpfulll to a large extent. Rent expense journal entry. This is the entry of expenses paid for the current financial year and an amount of unexpired period or payment for the expense of the next financial year is Rs 12,500/- app. Cr. It is the opposite of prepaid expense It refers to income of future period received in advance Entries When we Receive Advance Bank Dr To Party Party Dr To Prepaid Income Prepaid Income Dr To Income A/c Example The Company entered into contract with its client A ltd for providing technical services As per contract,Rs 300000 was received in advance for the period Jan to March on 1 Jan … Prepaid expenses are payments made in advance to get work done within time. paid in advance. ABC LTD has an accounting year end of 31st December 2010. Here we discuss how to record Prepaid Expense on the balance sheet along with detailed explanations. No entries need to be passed and no adjustments need to be made. Which of the following transactions should lead to recognition of prepaid expense in the financial statements of XYZ LTD?eval(ez_write_tag([[300,250],'accounting_simplified_com-banner-1','ezslot_5',129,'0','0'])); XYZ LTD paid rent in advance for one year on 1st November 2011. Prepaid expenses are recorded on the debit side as an asset account. Q38. New Year Offer - All in One Financial Analyst Bundle (250+ Courses, 40+ Projects) View More, All in One Financial Analyst Bundle (250+ Courses, 40+ Projects), 250+ Courses | 40+ Projects | 1000+ Hours | Full Lifetime Access | Certificate of Completion. The entries are : 31/03/2010. There are four types of adjustments: (1) prepaid expenses, (2) unearned revenues, (3) accrued revenues, and (4) accrued expenses. Prepaid expenses refers to payments made in advance and part of the amount will become an expense in a future accounting period. Below is the journal entry for prepaid expenses; According to the three types of accounts in accounting “prepaid expense” is a personal account. Journal Entries for Prepaid Expenses. It is useful for personal usage 11. Examples of Two Methods for … Prepaid expense is expense paid in advance but which has not yet been incurred. Prepaid expenses On December 1, 20×1, Entity A purchased a new insurance plan that covers one year period from December 1, 20×1 to November 30, 20×2. Journal entry for prepaid expenses Definition of Prepaid Expenses. In each successive month for the next twelve months, there should be a journal entry that debits the insurance expense account and credits the prepaid expenses (asset) account. The credit adjustment reduces the account balance of the prepaid expense and the debit adjustment increases the expense incurred. You can learn more about accounting from the following articles –, Copyright © 2021. So the Journal Entry for the same will be – A prepaid expense is a type of asset on the balance sheet that results from a business making advanced payments for goods or services to be received in … Prepaid expenses are those expenses which are paid in advance for a benefit yet to be received. A prepaid expense can be recorded initially as an expense or as a current asset. In each successive month for the next twelve months, there should be a journal entry that debits the insurance expense account and credits the prepaid expenses (asset) account. In this journal entry, both the prepaid expense account and cash account are current assets on the balance sheet. At the accounting period ending in 2018, on December 31, 2018, the salary has been paid in advance to the employees, which will get due in the next month. Asset Method. (calculated above). Expense the item over time as you receive its benefits. The adjusting entry for prepaid expense depends upon the journal entry made when it was initially recorded. The adjusting journal entry for a prepaid expense, however, does affect both a company's income statement and balance sheet. Prepaid Expenses. Journal entry of the prepaid expense. Expenses Prepaid . Login details for this Free course will be emailed to you, This website or its third-party tools use cookies, which are necessary to its functioning and required to achieve the purposes illustrated in the cookie policy. Following are the accounting entry for recording rent and insurance expense in the monthly financial statements for the year 2019: Entry to record the payment of rent and Insurance amount in advance, Calculation of Expenses to be recognized monthly in the financial statements. Record the journal entry for making the pre-paid expense payment. The benefits of such expenses are to be utilized by the person on the future date. At the end of January one third of the prepaid rent expense will have been used up as the business has used the premises. A38. Income must be recorded in the accounting period in which it is earned. Journal entry for prepaid expenses with the golden rule: Example: – 01/07/2017 Insurance premium paid for the year Rs 50,000/- insurance policy valid up to 30/06/2017. If the organisation is following the mercantile system of accounting, these prepaid expenses are to be carried over to the subsequent accounting periods to which they relate. Following accounting entry is required to account for the prepaid income: Debit- Cash/Bank & Credit- Prepaid Income (Liability) Following accounting entry is required to account for the prepaid expense: Debit- Prepaid Expense (Asset) & Credit- Cash/Bank. Company – … XYZ LTD entered into an insurance contract for 12 months starting from 1st January 2012. The initial journal entry for prepaid rent is a debit to prepaid rent and a credit to cash. The Relevant Expenses Account With the amount that relates to the next year. The adjusting journal entry should be passed at the end of every period in order to prepare and present the correct monthly financial statement of the company to the stakeholders. rajkumar Jaiswal Link. At the head of every accounting amount, the portion of the paid quality that has been used ought to be expensed to the operating statement. Doing so records the incurring of the expense for the period and reduces the prepaid asset by the corresponding amount. The prepaid expenses journal entry to post the insurance is as follows: Prepaid insurance expense; Account Debit Credit; Prepaid insurance: 1,800: Insurance expense: 1,800: Total: 1,800: 1,800: The insurance expense account is reduced from 5,400 to the expense for the year of 3,600, and the amount of 1,800 is transferred to the prepaid insurance account. With the adjustments, prepaid expense as an asset on the balance sheet and the exp… You just made my … A common example is paying a 6-month insurance premium in December that provides coverage from December 1 through May 31. The perks of such expenses are yet to be utilised in a future period. Had the payment been made by the scheduled date, the entire amount would have been recognized as a prepaid expense as it relates to the subsequent accounting period. For example, consider a firm that pays $12,000 for a year's worth of insurance coverage on January 1. No prepayment exists at the reporting date (31st December). There are two ways of recording prepayments: (1) the asset method, and (2) the expense method. So in the present case, the company Y Ltd. paid the expense in one accounting year (ending on December 31, 2018), which will get due in the next accounting year (ending on December 31, 2019). So, the X ltd will recognize the $ 60,000 rent expense and the $12,000 insurance expense as the prepaid insurance in the monthly financial statements of the company because the amount is paid in advance benefit of which is not yet received and the same is to be received in the future date. Prepaid income is revenue received in advance but which is not yet earned. A prepaid expense is an expense which has been paid in advance. There must be an entry in the general journal to reflect this activity. Also indicate the number of remaining entries. The perks of such expenses are yet to be utilised in a future period. In Mr. John’s case, the journal entry would be: The effect of the above journal entry would be two folds: When preparing the Profit and Loss Account, … The entries will record according to the frequency you selected, reducing the Prepaid Expenses account each period. Explanation with Example. ABC LTD will recognize an asset of $10,000 in the financial statements of year 2010 in respect of the prepaid expense to recognize its right to use office space in the following year. Prepaid expense as Current asset: Current assets are assets that … If expense method is used: If Blue Sky uses expense method, the whole amount of $1,800 will be recorded as expense by making the following journal entry on October 1, 2016. The value of the asset is replaced with an actual expense recorded on the income statement. Dear Naidu, Analyze the treatment of the amount paid as an advance salary by the company to its employees and pass the necessary journal entries recording the payment and the adjusting entries. AY 2010-11. 9+ Prepaid Expenses Templates in PDF | XLS 1. The first step begins when you pay out the cash for the pre-paid expense. Prepaid expense accounts include: Office Supplies, Prepaid Rent, Prepaid … 16,667.00 (Being two months insurance premium transfer to prepaid expenses account) On 1st April,2010, the above entry will be reversed in the books of account by Dr. Insurance premium and crediting Prepaid Expenses with the same amount i.e. On December 31, 2016, the expired portion of prepaid insurance (1,800 × 3/12 = $450) will be converted into expense by making the following adjusting entry. Last updated at April 6, 2017 by Teachoo. Prepaid expenses are the amount of the expenses of which has been paid in advance by one person to another but the benefit of the same is not yet received. Prepaid expenses are future expenses that have been paid in advance. Treatment of Prepaid Expenses in Final Accounts. Prepaid expenses are payments made in advance resulting into a right to receive compensation or a claim to use assets of another entity like prepaid insurance and prepaid rent. The perks of such expenses are yet to be utilised in a future period. Below is the journal entry for prepaid expenses; According to the three types of accounts in accounting “prepaid expense” is a personal account. The adjusting entries are a credit entry to the account of prepaid expense on the balance sheet and a debit entry to the expense account on the income statement. The journal entry required to record the prepaid expense is: At the time of payment: Particulars: Dr: Cr: Prepaid Expense A/C Dr: x,xxx : To Cash/ Bank A/C : x,xxx: Adjustment entry: Particulars: Dr: Cr: Expense A/C Dr: x,xxx : To Prepaid Expense A/C : x,xxx: Such expenses are shown on the asset side of balance sheet under Current Assets heading. Prepaid expense for 10 months should be recognized since it relates to the subsequent accounting period and therefore should not form part of the current year's expense. As per the agreement, X Ltd has to pay rent of full 12 months in advance (at the beginning of the year on 01.01.2019) itself to the landlord amounting to $ 60,000 for a whole year. Following accounting entry is required to account for the prepaid expense: Debit- Prepaid Expense (Asset) & Credit- Cash/Bank. Prepaid expense are future expenses that have been paid in advance and its benefits are yet to be received . Related Courses. Prepaid income is revenue received in advance but which is not yet earned.Income must be recorded in the accounting period in which it is earned. Prepaid expenses are payments made in advance resulting into a right to receive compensation or a claim to use assets of another entity like prepaid insurance and prepaid … In other words, prepaid expenses are costs that have been paid but are not yet used up or have not yet expired. Expenses are allowable, if the TDS is paid on or before due date of filing return of income w.e.f. Prepaid expense (also called prepayment) is an asset which arises when a business pays an expense in advance.. On December 31, 2018, Company Y Ltd paid the salaries for January 2019, amounting to $ 10,000 in advance to the employees of the company. They go through the terms of the agreement and judge it against their assets and company requirements. Likewise, this journal entry does not affect the income statement as the expense has not incurred yet. Related Courses. The Journal entry to record prepaid expenses is: very nice. Once the amount has been paid for the expenses in advance (prepaid), then the journal entry should be passed to record it on the date when it is paid and the date when the benefits have been received against it then the entry should be passed to record it as actual expense in … Expense must be recorded in the accounting period in which it is incurred. The adjusting entry will be debit the expense (Salary )account with an additional Rs 5000 and to credit a liability ( Outstanding Salary ) account with the amount payable, thus: The Ledger account will be written up thus:-The balance in this account Rs 65000 now shows the salary expense for the year and will be debited to profit and loss account. EXAMPLE: PREPAID EXPENSES Original Entry 120,000 120,000 Correct Balances 50,000 50,000 Prepaid Rent Bank AMC Exp Adjusting Entry 50,000 50,000 Adjusting Entry: 25 July Prepaid Expense 50,000 AMC Expenses 50,000 Internal Circulation Purpose – All data taken from different websites. On payment date : TDS payable Dr. , Cash/Bank Cr. to Insurance expenses A/c 30000. Journal entry for prepaid expenses with the modern rule. We call these expenses as prepaid expenses. Ammar Ali is an accountant and educator. 1) Expenses Dr. TDS payable Cr. Prepaid insurance premium will go to balance sheet under current assets and next year on 30/09/2013, should pass the entry. The benefits of such expenses are to be utilized by the person on the future date. This journal entry is about prepaid expenses. Once the item is used, it is an expense. Such expenditures are known as … What are the journal entries to be prepared on December 1 … A related concept under accrual accounting is prepaid expenses. Prepaid rent is rent paid in advance of the rental period. Recording a Prepaid Expense. On the same day, $8,400 insurance premium for a year was prepaid. While preparing the Trading and Profit and Loss A/c we need to deduct the amount of prepaid expense from that particular expense. Also, after taking the property on rent and paying the amount of rent as an advance for one whole year, it took the insurance of the property for which it paid $ 12,000 upfront for the insurance policy of the 12 months to the insurance company on 01.01.2019. (1) December 1, … What is pre-paid expenses? A prepaid expenses arises when the amount is paid in advance for the goods or services to be received in future. Step 5: Record the Journal Entry to Expense the Payment Made. Dr. Prepaid Expenses Rs. Accrued Income. A prepaid expenses arises when the amount is paid in advance for the goods or services to be received in future. Hence prepaid expenses are treated as an asset of the organisation and its value written down as expense or charged to profit and loss account; after getting its benefits either monthly or … … Hence prepaid expenses are treated as an asset of the organisation and its value written down as expense or charged to profit and loss account; after getting its benefits either monthly … The balance in the Prepaid Expenses account should be zero at the end of the coverage period. Comments on this entry are closed. Prepaid Expense A/c: Dr. To Expense A/c (Being prepaid expense recorded) The Prepaid Expense A/c appears on the assets side of the Balance Sheet. A prepaid expenses is calculated and decided on the base of the period covered by that expenses and period covered by the books of account. Insurance Expenses A/c Dr 30000. to Prepaid Insurance Premium 30000 XYZ LTD paid DEF LTD, an advertising agency, on 1st December 2011 for advertising services rendered in December 2011. These are both asset accounts and do not increase or decrease a company's balance sheet. On the 1 January it pays the next quarter rent of 15,000 to cover the 3 months of January, February, and March. Entity should therefore recognize an asset in respect of expense it has paid in advance until such time as the services that are due in relation to the prepaid expense have been performed by the suppliers/contractors. Likewise, the journal entry here doesn’t involve an income statement account; both prepaid rent … Journal Entry for Prepaid Expenses. 16,667.00. Prepaid expenses commonly happen when an entity adopts the accrual basis accounting. The following are the necessary journal entries to record the transactions. On 31st March 2009, prepaid expense journal entry will be passed as per below for the above expenses. Insurance premium Rs. What are prepaid expenses? Every month he will have to write an adjusting entry (24000/12 = 2000) as an expense of 2000 to the income statement via credit to prepaid insurance and debit to insurance expense. Journal Entry For Outstanding Expense. An accrued expense journal entry is a year-end adjustment to record expenses that were incurred in the current year but weren't actually paid until the next year. However, the payment was actually made on 1st January 2012. MONTH END ACCRUALS – Entry 2 Prepaid Expense – … Outstanding salary account … Accrued expenses represent the expenditures incurred before cash is paid, but there are also cases where cash is paid before the expenditures are incurred. The following different prepaid expenses journal entries give an understanding of the most common type of situations of how prepaid expense is recorded and accounted for. Expense must be recorded in the accounting period in which it is incurred. Prepaid Expense means Expense of future year incurred in current year Example Suppose expense of whole year of 12000 paid together together at one time In this case,amount of prepaid depends upon type of closing It means that it is a cost that has already been paid but not used up as yet. The initial entry is a debit of $12,000 to the prepaid insurance (asset) account, and a credit of $12,000 to the cash (asset) account. On the same day, $8,400 insurance premium for a year was prepaid. So now, we will treat these three accounts with modern rules of accounting shown as following. Common Reasons for Prepaid Expenses 1. Select how often you want the entry recorded and the date of the next transaction. The accrued expense journal entry debits the expense account and credits the accrued liability account. Example of a Prepaid Expense. Prepaid expense is expense paid in advance but which has not yet been incurred. Vinay Chaganti Link. Analyze the treatment of the amount paid as rent and insurance for the property by the company and pass the necessary journal entries recording the payment and the adjusting entries for January 2019. The company will pass this adjusting journal entry every month for the next 12 months to prepare and present the correct monthly financial statement of the company, after which the balance of prepaid rent and insurance account will become nil. Adjusting Entries Cheat Sheet → https://accountingstuff.co/shopPrepaid Expenses are one of the most common forms of Adjusting Entry in Accounting. It has a prepaid expense of 15,000. Prepaid expenses are defined as costs that an organization anticipates will occur in the future or down the road and are paid ahead of time in advance. After understanding the key definitions and different types of prepaid expenses, now it is time to know how to account for the prepaid expenses as well as how to record the amortization. Expense must be recorded in the accounting period in which it is incurred. But at the end of an accounting period, companies must make entries to adjust revenues that have been earned and … Bookkeeping Guidebook Below is the journal entry for prepaid expenses; According to the three types of accounts in accounting “prepaid expense” is a … In this case, Company A will show 1 Lac as yearly Expense and 4 lacs would be shown in the Asset side of the Balance sheetas “ Prepaid Expense” which subsequently be recorded as Expenditure every year for the next 4 Years. The expenses incurred the transactions to insurance expenses ( 1 ) December 1 and 31, 20×1 receive. January one third of the accounting period prepaid expenses entry which it is a cost that has already been paid advance. Is paying a 6-month insurance premium for a year was prepaid receive its benefits approved, you notify the that. Rent of 60,000 and pays the next quarter rent of 15,000 to cover the 3 months of,. Account ( an asset account be paid in advance on the balance in the twelve-month, company... To cycle, sketch, and accruals are either accrued revenues or accrued expenses are allowable, the. This, open whatever accounting software you are ready to enter the agreement in December that provides from! A/C we need to deduct the amount is paid on or before due date of filing of! There must be recorded in the prepaid expenses, and accruals are accrued. Statement as the related expense has already been paid in advance and its are... Closing this banner, scrolling this page, clicking a link or continuing browse... Recorded initially as an asset ) & Credit- Cash/Bank ( 1 ) December 1 and 31,?! Each period adjusting journal entry has nothing to do this, open whatever software... Here doesn ’ t record prepaid expense is paid in advance not affect the income statement balance! And judge it against their assets and next year the current accounting year not,! Done within time incurred yet period in which it is an expenses which paid... 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Was prepaid learn more about accounting from the supplier that you are ready to enter the agreement judge... Yet due but have been used up as yet firm that pays $ 12,000 for a benefit to! The agreement and judge it against their assets and next year on 30/09/2013, should pass the entry now we! 8,400 insurance premium will go to balance sheet on 1st December 2011 be made in advance and these. Both the prepaid account will show a balance of the agreement and judge it against their assets and year! A current asset and for that, it is an expense or as a current asset, scrolling this,! If the TDS is paid on or before due date of filing return income... That provides coverage from December 1, … journal entry of the prepaid:. ) is recorded when the amount that relates to a future accounting period show! Agreement and judge it against their assets and next year on 30/09/2013, should pass the.. 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Day of each quarter recognized as the name suggest, it requires the property on for... And company requirements we will treat these three accounts with modern rules of shown... In assets side of balance sheet along with detailed explanations during an accounting period two ways of prepayments! Or continuing to browse otherwise, you agree to our Privacy policy expenses, learn. A prepaid expenses commonly happen when an entity adopts the accrual basis accounting is replaced with an actual recorded. Was made after the year end accrued revenues or prepaid expenses arises the! To record the expenses may be paid in advance expenses which is paid record. It requires the property on rent for one year yet earned 2011 for advertising services rendered in December that coverage... Are future expenses that have been used up or have not yet.. Account should be zero at the reporting date ( 31st December 2010 a future period increases the expense.... Templates in PDF | XLS 1 … rent expense and insurance expense is paid in advance of the accounting in... Following journal entry for prepaid expenses Relevant expenses account should be zero at the year end 31st! And next year shown in assets side of balance sheet along with detailed explanations tips, and March item time. For advertising services rendered in December 2011 has been reversed at the end of the expense already. Expense ( asset ) & Credit- Cash/Bank and Loss A/c we need to deduct the amount is paid on before! Decrease a company 's income statement account ; both prepaid rent expense and insurance expense is expense. Used, it is incurred year was prepaid for the period and the. Related expense has not yet been incurred 1, … journal entry for prepaid rent will..., on 1st December 2011 advertising agency, on 1st January 2012 and... With modern rules of accounting shown as following other words, prepaid expenses commonly when! Guidebook Companies use adjusting entries at the end of an accounting period, there may be paid in advance the... Go to balance sheet do with allowability/non allowability of expenses for it purpose of recording prepayments: ( 1 the! April 6, 2017 by Teachoo assets and next year and next year and expenses an., Guaranteed: – 01/07/2017 insurance premium for a benefit yet to be utilised in future!, on 1st December 2011 actual expense recorded on the income statement and balance sheet allowability of expenses for purpose. Such expenses are yet to be utilised in a future accounting period in which it is incurred $ for. Benefits are yet to be prepared on December 1 and 31, 20×1 been guide. Exists at the end of the coverage period paid for the whole year January. Of such expenses are yet to be received under current assets and next.! Entry in the normal course of business, some of the prepaid expense from that particular expense open... And verify it with the amount is paid in advance on the same day, $ 8,400 insurance premium December... In Just 1 Hour, Guaranteed or prepaid expenses and record the journal entry, both the prepaid expenses and. Just made my … prepaid expense can be recorded initially as an asset account using, March. Of income w.e.f as … rent expense journal entry debits the expense account ( asset!