B for meeting his medical expenses for the next six months on. Suppose Company A pays Advance Salary to Mr. read more on the Asset Side of the Balance Sheet. Instead, only Rent for the three months, i.e., Jan 19-Mar 19, will be booked as Expenses, and the remaining nine months of Rent will be shown as Prepaid Expenses under the head Other Current Assets Current Assets Other current assets refer to the category of assets which record all the uncommon and insignificant assets readily convertible into cash and doesn't fit in any common current assets categories like cash & cash equivalents, inventory, trade receivables, etc. The Entire Money paid as Rent to the landlord will not be considered Expenses for FY 18-19. The Company Follows the Financial Year of Accounting. Suppose Company A pays Rent to the landlord of the Building on for the next 1 Year till.

So the Journal Entry for the same will be – read more as “ Prepaid Expense,” which subsequently be recorded as expenditure every year for the next 4 Years. They create the company's worth and are recorded in the balance sheet.

In this case, Company A will show 1 Lac as a yearly expense, and four lacs would be shown in the Asset side of Accounting Asset Side Of Accounting Assets in accounting refer to the organization's resources that hold specific economic value and facilitate business operations, meet expenses, and generate cash flow. 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. E.g., salaries and taxes paid in advance, paying Rent before using any space for commercial purposes, any premiums for insurance of business, any interest/installment to be paid on using any hired equipment, any utility bills, etc. Prepaid expenses refer to the payment made for the expenses that will happen in the future.

Prepaid expenses balance sheet