Prepaid expenses explained

Prepaid expenses: an accounting term that deals with timing differences between paying for something and using it. This short video covers examples of prepaid expenses in your personal life, in small business, as well as large publicly listed corporations. We will also go through the prepaid expenses accounting entries.

Do you have any other examples of prepaid expenses in your personal life? Please post them in the comments below this video, as I would love to compile a list of as many good prepaid expense examples as possible!

Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and leadership enjoyable and easier to understand. Learn the business vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better stock market investment decisions. Philip delivers training in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!

[jayeetadey]

To the point and clear...other daily prepain exps in personal life is prepaid recharge of bus pass for daily commute or metro smart card...in small company insurance of car.

[NARAYANMISHRA-pdlm]

Education fees can also be an example of prepaid expense.

[tinkerbooks]

I prepay my website hosting service and domain name services, in advance for varied lengths of time. I credit the amount paid ($X.xx) for example, for six months of service, in an asset account, 'Prepaid Expenses' and debit cash. Then, I divide $X.xx by 6 months and credit that amount as a monthly expense, debiting the Prepaid Expense account, for six consecutive months.

If the Tax period occurs in the middle of the six months, you declare the expired months as expenses. Whatever is left in the Prepaid account is an asset like cash in the bank you haven't spent yet.

[amiterp]

Thank you Sir ❤️ for these Quality vedios.
Your vedios clarifies a lot of doubts related to accrual accounting 🙏.

[BLINKTEXT]

Prepaid while ordering something online

[gervith]

thank you! great video, keep posting them please! Can you make a video about VAT accruals and what I need to do to be able to work in a general ledger department?

[konstancyja]

Examples:
Gym yearly ticket
Cafeteria tickets
Credit card yearly fee

[stacyliddell]

In Korea, I pay my gym membership for the year upfront for a discount.

[rhythmandacoustics]

Public Transport Annual Price paid in one shot.
Anything paid in one-shot that lasts for the year, I guess. Like Depreciation.

[warrentoles]

How would you explain what a treasury is a d a "pre-paid treasury account"?

[cindypope]

All bills are prepaid with our credit since we are the faith and credit of the US govt. There is no lawful money since 1933. Usc 18 sec. 8.

[CoderDBF]

I disagree.
If I pay €240 for a 24 month subscription. Then I will book 240 the day I buy the subscription.
What you're suggesting requires me to make multiple different entries over an extended period, I have better things to do with my time. Using your method the accountant alone is going to cost more than the actual subscription service.