[number_cruncher_24]

Hi – I was wondering if someone could help me with an accounting question – here’s the scenario: Our fiscal year ends on May 31. We received a bill for our insurance policy on May 20. The bill is for insurance for the period of 6/15 through 12/15. We enter all bills into the system when received. When I enter this bill into the system, it will result in a credit to A/P but which account should be debited? It’s not an expense for the current fiscal year because it is for a future period, but we won’t pay it until after 5/31, so it’s not a prepaid yet either.

[LaxCPA]

I am following GAAP. You can't record a prepaid asset for something that has not been paid.

[mla1169]

LOL. No concept of accrual accounting at all.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[mla1169]

LOL. No concept of accrual accounting at all.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[LaxCPA]

Just to clarify because I might not have been clear. I am not saying it should be expensed during the fiscal year ending May 31 I am saying it should not show up on the balance sheet or profit loss until the next year.

[LaxCPA]

Just to clarify because I might not have been clear. I am not saying it should be expensed during the fiscal year ending May 31 I am saying it should not show up on the balance sheet or profit loss until the next year.

[mla1169]

Yes I understand exactly what you are saying but it doesn't change the fact that you are wrong.

Have you taken audit? Do you understand the concept of confirmations being sent out to vendors? What would an auditor recommend you do if the insurance company said they billed you on May 20? I guarantee they wouldn't recommend you just not enter it because it hasn't been paid yet. Your payables balance should agree to your vendor's receivables balance at year end.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[mla1169]

Yes I understand exactly what you are saying but it doesn't change the fact that you are wrong.

Have you taken audit? Do you understand the concept of confirmations being sent out to vendors? What would an auditor recommend you do if the insurance company said they billed you on May 20? I guarantee they wouldn't recommend you just not enter it because it hasn't been paid yet. Your payables balance should agree to your vendor's receivables balance at year end.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[Not a Quitter]

I'm with LaxCPA. They haven't paid anything so they shouldn't record a prepaid item. That's an asset…for which they haven't paid. I don't think it's proper to record a payable until the goods and services are received either.

FAR- 85 I'm DONE!
BEC- 75
REG- 60,60,75
AUD- 74,74,83

CPAExcel used for BEC, AUD, REG
Exam Matrix used for FAR plus NINJA Blitz, cpareviewforfree and a little CPAExcel

[Not a Quitter]

I'm with LaxCPA. They haven't paid anything so they shouldn't record a prepaid item. That's an asset…for which they haven't paid. I don't think it's proper to record a payable until the goods and services are received either.

FAR- 85 I'm DONE!
BEC- 75
REG- 60,60,75
AUD- 74,74,83

CPAExcel used for BEC, AUD, REG
Exam Matrix used for FAR plus NINJA Blitz, cpareviewforfree and a little CPAExcel

[Not a Quitter]

Plus, who cares what the vendor has recorded on his books. Lax's company is not wrong in not recording the expense until the next year. Don't auditors usually send out confirmations based on balances recorded on the clients books? If Lax doesn't record the transaction until the following fiscal year then there is nothing to confirm, right?

FAR- 85 I'm DONE!
BEC- 75
REG- 60,60,75
AUD- 74,74,83

CPAExcel used for BEC, AUD, REG
Exam Matrix used for FAR plus NINJA Blitz, cpareviewforfree and a little CPAExcel

[Not a Quitter]

Plus, who cares what the vendor has recorded on his books. Lax's company is not wrong in not recording the expense until the next year. Don't auditors usually send out confirmations based on balances recorded on the clients books? If Lax doesn't record the transaction until the following fiscal year then there is nothing to confirm, right?

FAR- 85 I'm DONE!
BEC- 75
REG- 60,60,75
AUD- 74,74,83

CPAExcel used for BEC, AUD, REG
Exam Matrix used for FAR plus NINJA Blitz, cpareviewforfree and a little CPAExcel

[Not a Quitter]

The vendor should have this recorded as a deferred revenue anyway if I'm following everything correctly.

FAR- 85 I'm DONE!
BEC- 75
REG- 60,60,75
AUD- 74,74,83

CPAExcel used for BEC, AUD, REG
Exam Matrix used for FAR plus NINJA Blitz, cpareviewforfree and a little CPAExcel

[Not a Quitter]

The vendor should have this recorded as a deferred revenue anyway if I'm following everything correctly.

FAR- 85 I'm DONE!
BEC- 75
REG- 60,60,75
AUD- 74,74,83

CPAExcel used for BEC, AUD, REG
Exam Matrix used for FAR plus NINJA Blitz, cpareviewforfree and a little CPAExcel

[Gatorbates]

DR: Prepaid Expense

CR: A/P

End of Story.

Licensed Florida CPA:
B: 71, 73, 79
A: 83
R: 78 (expired), 77
F: 74, 74, 80

It's finally freaking over.

[Gatorbates]

DR: Prepaid Expense

CR: A/P

End of Story.

Licensed Florida CPA:
B: 71, 73, 79
A: 83
R: 78 (expired), 77
F: 74, 74, 80

It's finally freaking over.

[Author]

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