Tuesday, January 5, 2010

Using Credit to Purchase Prepaid Expenses

Prepaid expenses can also be purchased on credit instead of cash. The appropriate accounting journal entries are listed below for prepaid expenses that are purchased by a company on credit.


Type of Journal Entry
Account titles
Debit
Credit
Purchase and advance payment of a short-term asset that will be used up in under a years period of time. The purchase is made with cash.

For example, prepaid rent, prepaid insurance, prepaid advertising, and supploes
Prepaid Account
Accounts Payable
XXX

XXX



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