[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.

[mla1169]

What that quote actually means is signing a contract in itself is not enough to book a liability. An invoice from a vendor is enough to book a payable. Always.

So sorry but I've been an accountant since 1996.

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

Massachusetts CPA (non reporting) since 3/12.

[Gatorbates]

I side 100% with mla1169.

I anticipate the Drama Ninja is getting into his workout clothes right about now.

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

It's finally freaking over.

[Gatorbates]

I side 100% with mla1169.

I anticipate the Drama Ninja is getting into his workout clothes right about now.

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

It's finally freaking over.

[mla1169]

No need for drama. Seriously if you held the invoice and didn't enter it until after year end it would probably fly with the auditors. It is correct though to enter it to prepaid.

There would never be payables entered to prepaid if you couldn't call it a prepaid asset until the cash was disbursed.

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

Massachusetts CPA (non reporting) since 3/12.

[mla1169]

No need for drama. Seriously if you held the invoice and didn't enter it until after year end it would probably fly with the auditors. It is correct though to enter it to prepaid.

There would never be payables entered to prepaid if you couldn't call it a prepaid asset until the cash was disbursed.

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

Massachusetts CPA (non reporting) since 3/12.

[HerdCPA]

I agree. Payables shouldn't be entered to prepaid since they are not paid. Does that sentence not sound incorrect to you? You are entering PREPAID (already paid) assets and a LIABILITY (not paid) together? Link: https://www.accountingcoach.com/accounts-payable/explanation/2 “Regardless of the company's size, the mission of accounts payable is to pay only the company's bills and invoices that are legitimate and accurate. This means that before a vendor's invoice is entered into the accounting records and scheduled for payment, the invoice must reflect:

what the company had ordered

what the company has received

the proper unit costs, calculations, totals, terms, etc.”

[HerdCPA]

I agree. Payables shouldn't be entered to prepaid since they are not paid. Does that sentence not sound incorrect to you? You are entering PREPAID (already paid) assets and a LIABILITY (not paid) together? Link: https://www.accountingcoach.com/accounts-payable/explanation/2 “Regardless of the company's size, the mission of accounts payable is to pay only the company's bills and invoices that are legitimate and accurate. This means that before a vendor's invoice is entered into the accounting records and scheduled for payment, the invoice must reflect:

what the company had ordered

what the company has received

the proper unit costs, calculations, totals, terms, etc.”

[RUGUY22]

Dr. Prepaid Expense

Cr. Accounts Payable

At least that's what we do at the company I work for. I thought it strange when I first started working here, as it differs to some extent from what I learned in my MSA program. But apparently this is what's done in practice.

IL Candidate

AUD - 98 (11/11/13)
BEC - 69 (4/19/14); 83 (7/21/14)
FAR - 88 (11/26/14)
REG - 90 (2/26/15)

Ethics - 98 (3/9/15)

Using the CPAexcel review course and Wiley Test Bank.

[RUGUY22]

Dr. Prepaid Expense

Cr. Accounts Payable

At least that's what we do at the company I work for. I thought it strange when I first started working here, as it differs to some extent from what I learned in my MSA program. But apparently this is what's done in practice.

IL Candidate

AUD - 98 (11/11/13)
BEC - 69 (4/19/14); 83 (7/21/14)
FAR - 88 (11/26/14)
REG - 90 (2/26/15)

Ethics - 98 (3/9/15)

Using the CPAexcel review course and Wiley Test Bank.

[HerdCPA]

If it is done the way you are saying it will eventually be correct as the following entries would be made:

Dr. Expense

Cr. Prepaid Expense

Dr. A/P

Cr. Cash

However, what I am saying is that as of the balance sheet date before the expense is incurred the assets and liabilities are overstated.

[HerdCPA]

If it is done the way you are saying it will eventually be correct as the following entries would be made:

Dr. Expense

Cr. Prepaid Expense

Dr. A/P

Cr. Cash

However, what I am saying is that as of the balance sheet date before the expense is incurred the assets and liabilities are overstated.

[Anonymous]

Anyone else find it odd that Lax exited the conversation as Herd entered. Strangely enough, they agree too.

[Anonymous]

Anyone else find it odd that Lax exited the conversation as Herd entered. Strangely enough, they agree too.

[HerdCPA]

I am the only person here posting actual links and information related to the subject instead of just stating my opinion and I am the person getting called out as troll. That is funny to me.

[HerdCPA]

I am the only person here posting actual links and information related to the subject instead of just stating my opinion and I am the person getting called out as troll. That is funny to me.

[Author]

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