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knations · May 16, 2011, 09:53 PM

How would I prepare entries or transactions under the method that records prepaid expenses as assets and records unearned revenues asliabilites. Also prepare adjuting entreis at the end of th year.

How wold I prepare entres for tansacions undr the method tat records prepaid expenses as expenses an records unearnedrevenues as revuenus.

Just Looking · May 16, 2011, 11:27 PM

Prepaid expenses are assets that are paid for upfront and will be consumed over time. When you first record it, it is a debit to Prepaid Expense and a credit to Cash. The asset is then expensed when consumed by debiting an appropriate expense account, with the credit going to Prepaid Expense. An example is insurance where you might pay for a year in advance. Typically, if it's a year of prepaid insurance you write off 1/12 each month. If you are asking about writing off entries just at the end of the year, you have to figure out the portion of the year that has occurred. For example, if the insurance runs 4/1 to 3/31 and you are a 12/31 year end, you'd write off 9/12 of the insurance. Prepaid Insurance is just one example of a prepaid expense. Another example is supplies, where you write off the supplies as consumed based on amount.

Unearned revenue occurs when you receive payment before earning the revenue. You have a liability as you owe the service. You have not yet earned that fee. The debit is Cash and the credit is Unearned Revenue. When the amount becomes earned, you debit Unearned Revenue and credit Revenue (your sales account).

knations · May 17, 2011, 10:09 AM

Can you help me with the actual problem

Just Looking · May 17, 2011, 12:45 PM

I will help if you show the problem and your solution. That way I know you have worked on the problem and I can see where you are having difficulty.

knations · May 22, 2011, 12:33 PM

Okay.. find me on {offline contact info removed}

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