PREPAID EXPENSES

Some expenses may be paid in advance e.g.Insurance,rent,advertising office supplies etc.at the end of the accounting period a portion of the period or services expired or some items have been consumed but an other portion of period or services will be UN expired or unused or unconsumed.the portion of the economic benefits from the payment or expenditure which has been expired or consumed is an expense of the current period


ILLUSTRATION: following are some entries related to office rent .
Adamjee Traders had paid the followings:
On August 1,paid Rs 40,000 by cheques for the office rent for the period of eight months @ Rs.5,000 P.M.

Aug 1, prepaid office rent    40,000
               Bank                                40,000
       ___________________