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A.PREPAID EXPENSES
This is an expense that is already paid but not incurred.
This is exactly the opposite of accrued expense. There are two methods or approaches that can be used in recording prepayments, namely: Expense Method and Asset Method.
a. Expense Method- under this method or approach, an expense
................account is debited upon payment of the prepaid expense.
................This method is also called “nominal approach” because
................an expense is an Income Statement accounts.
b. Asset Method- under this method or approach, an asset account is
................Debited upon payment of the prepaid expense, that’s why it is also called as the “real
................approach” for an asset account is a real account.
.................“in short ang prepaid expense ay parang prepaid load lang yan, pagkatapos ng isang araw ung ibang load mo gamit na so that’s ur expense, pero ung iba hindi pa and that makes ur assets, dba mas maganda kung pagbukurin ang expense at asset pra malaman mo kung ilan pang load ang pwede mo pang ipang text sakin ^_^V”
(yuck A.S.A nmn ako :D)
.................“pero if pagkatapos ng isang araw na un ubos na load nyo, natural wag na kaung magbalak magbukod, ala na nmn kau paghiwalayin eh :D, parang prepaid expense din when the accounting period ends, then lahat namn ng narecord mo naexpense (take note ha expense) ay nagamit mo, wag ka na gumawa ng adjusting entry ala na kwenta un kasi la nmn kau paghihiwalayin na accounts, para lang po yan sa paghihiwalay ng expense mo sa asset mo pa nung pagdating ng end of accounting period, pero pag Asset account nirecord mo nung umpisa aun nid mo na mag adjusting kasi may asset ka pa ba, dba sabi ko ubos na so expense na un :D”
To Illustrate the difference bet 2 methods:
..........On June 2, 2008 Nobody Company paid 20,000Php for the supplies purchased. At the end of accounting period, 5,000Php of the supplies remain unused.
JOURNAL ENTRY using….
This is an expense that is already paid but not incurred.
This is exactly the opposite of accrued expense. There are two methods or approaches that can be used in recording prepayments, namely: Expense Method and Asset Method.
a. Expense Method- under this method or approach, an expense
................account is debited upon payment of the prepaid expense.
................This method is also called “nominal approach” because
................an expense is an Income Statement accounts.
b. Asset Method- under this method or approach, an asset account is
................Debited upon payment of the prepaid expense, that’s why it is also called as the “real
................approach” for an asset account is a real account.
.................“in short ang prepaid expense ay parang prepaid load lang yan, pagkatapos ng isang araw ung ibang load mo gamit na so that’s ur expense, pero ung iba hindi pa and that makes ur assets, dba mas maganda kung pagbukurin ang expense at asset pra malaman mo kung ilan pang load ang pwede mo pang ipang text sakin ^_^V”
(yuck A.S.A nmn ako :D)
.................“pero if pagkatapos ng isang araw na un ubos na load nyo, natural wag na kaung magbalak magbukod, ala na nmn kau paghiwalayin eh :D, parang prepaid expense din when the accounting period ends, then lahat namn ng narecord mo naexpense (take note ha expense) ay nagamit mo, wag ka na gumawa ng adjusting entry ala na kwenta un kasi la nmn kau paghihiwalayin na accounts, para lang po yan sa paghihiwalay ng expense mo sa asset mo pa nung pagdating ng end of accounting period, pero pag Asset account nirecord mo nung umpisa aun nid mo na mag adjusting kasi may asset ka pa ba, dba sabi ko ubos na so expense na un :D”
To Illustrate the difference bet 2 methods:
..........On June 2, 2008 Nobody Company paid 20,000Php for the supplies purchased. At the end of accounting period, 5,000Php of the supplies remain unused.
JOURNAL ENTRY using….