Prepaid Expense

Adjustments at the Balance Date and Preparation of Sole Proprietorship Financial Statements

MS: Belanja Prabayar · EN: Prepaid Expense · ZH: 预付费用

Meaning

A prepaid expense is an expense paid during the current period whose benefit extends into a future accounting period. The unused portion is deducted from the expense in the Income Statement and reported as a current asset in the Statement of Financial Position. This ensures only the current period's expense is charged.

Example

Seri Flower Shop pays RM2,400 insurance for one year on 1 October, and the financial year ends 31 December. Only RM600 (3 months) is this year's expense; RM1,800 is recorded as prepaid insurance (a current asset).

Source: DSKP KSSM Prinsip Perakaunan Tingkatan 4

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