Prepaid Expense and Recognition

To configure prepaid expenses, show when the payments hit accounts payable, and reflect the recognition of the prepaid expense, use the Prepaid Expense and Recognition template.

Prepaid expenses are budgeted and affect the Net Gain/Loss line on the Projected Balance Sheet. An annual total is also provided. These values affect two balance sheet accounts. The total increases an asset account (such as Prepaids), and the budgeted amounts are used to recognize and reduce the Prepaid account in the months in which they are budgeted. The total also increases a liability account (such as Accounts Payable) in a specified month (or months, so that it could be paid out annually, quarterly, or monthly) and is amortized away from that line according to the Amortization Schedule.

The example illustrates an expense that occurs in the first month of the fiscal year. If the expense occurs in a later month, you’d specify the correct starting month, and add another line to the SPW to recognize the carryover expense from the previous year.

Prepaid Expense and Recognition Template