You\u2019ve prepaid something for a longer period in time, let\u2019s say your quarterly rent and now you\u2019re thinking whether to distribute this expense over the period you paid for or not. I\u2019ll give you reasons why you shouldn\u2019t do it.\u00a0<\/p>\n
One of the main reasons I\u2019d say it\u2019s not worth to spread the expense over the period is simple \u2013 there\u2019s 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\u2019d regularly monitor it monthly), but consider that you\u2019ve 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?<\/p>\n
Something that\u2019s a regular expense anyway and is paid let\u2019s 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\u2019d say \u201cno\u201d.<\/p>\n
Don\u2019t 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\u2019re monitoring your income statement monthly and would like months to have close to linear expense lines. Up to you of course.<\/p>\n","protected":false},"excerpt":{"rendered":"
You\u2019ve prepaid something for a longer period in time, let\u2019s say your quarterly rent and now you\u2019re thinking whether to distribute this expense over the period you paid for or not. I\u2019ll give you reasons why you shouldn\u2019t do it.\u00a0<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25,65],"tags":[],"class_list":["post-3448","post","type-post","status-publish","format-standard","hentry","category-1-basic-accounting","category-1-14-prepayments-received"],"aioseo_notices":[],"_links":{"self":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/3448","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/comments?post=3448"}],"version-history":[{"count":2,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/3448\/revisions"}],"predecessor-version":[{"id":3451,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/3448\/revisions\/3451"}],"wp:attachment":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/media?parent=3448"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/categories?post=3448"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/tags?post=3448"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}