You’ve prepaid something for a longer period in time, let’s say your quarterly rent and now you’re thinking whether to distribute this expense over the period you paid for or not. I’ll give you reasons why you shouldn’t do it. 

One of the main reasons I’d say it’s not worth to spread the expense over the period is simple – there’s a lot of hassle around prepayments in general and too little benefit that arises from it. Sure you get your expenses all linear and no big fluctuations on the income statement (if you’d regularly monitor it monthly), but consider that you’ve got to account for the prepayment on the balance sheet and every month make an entry to put parts of this balance into expenses. Ask yourself if this particular expense is really worth it?

Something that’s a regular expense anyway and is paid let’s say twice a year or quarterly, is there real point in spreading it over the year, especially if the payment is even done around close to year-end or beginning? I’d say “no”.

Don’t get me wrong, accounting some expenses into prepayments is advisable and in some cases even mandatory, but keep it realistic and reasonable. Not everything should be there unless as I mentioned, you’re monitoring your income statement monthly and would like months to have close to linear expense lines. Up to you of course.