Archive / 1.04 Prepayments

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Recognising supplier prepayments

There are often times when you need to pay to your suppliers in advance. The reasons for why you’d need to do this may be what they are, but what matters to you, is recognizing those prepayments properly on your financial statements and treating them properly in your accounting.  (more…)

Why spread expenses over periods?

Instead of spreading expenses over period they relate to one could simply add the total to one period’s expense and be done with it. Of course, that is an option. However, when you think about it, wouldn’t it make more sense to have an expense spread? Surely you can see the benefits – less expense […]

Prepaying? Why?

Why would someone pay amounts up front? Surely voluntary you wouldn’t give away money before the date of payment has really arrived. Or is it so? Truth of the matter is that prepaying is a normal course of business for some types of expenses and done more often enough.  (more…)

Dealing with prepayments

Prepaid expenses are sums paid to suppliers that on your own balance sheet accumulate under one or a few balances all containing the word “prepayment” or “prepaid”. It’s to refer that those amounts are to be your future expenses and at this point they’re just amounts of money you’ve already paid to your suppliers. They’re […]

Accounting for prepayments – the best treatment method

On the balance sheet under current assets there may be prepaid expenses accounts, which in essence are future expenses the company has made an advance payment for. We have previously discussed those prepayments and how to initially treat them on the balance sheet (including relating accounting entries), however what we have come across during our […]

Prepayments received

As it happens, in normal course of business you may be paid in advance for something that you still have to do. You will be given resources to use and as such, you have taken a liability on your balance sheet. You are given money in return for a promise to provide a service or […]

Prepaid expenses – how to account them

There are times when you are either asked to make a prepayment for certain services or goods, or you simply decide to make an advance payment regardless of the reason behind it. When you make a prepayment, you give away money against a promise to receive something in near future. As such the payment done […]