![]() ![]() General guidelines for debits and credits on the balance sheet. To learn more about PepsiCo's financial statements, you can click here. It can sometimes be bucketed with other current assets like in the example below for PepsiCo’s balance sheet. More specifically, prepaid expense is recorded as a current asset. ![]() ![]() For example, if a company pays for 12 months of rent upfront, it expects to receive the benefits of that in the form of having an office space over the next 12 months. This is because it represents a future economic benefit to the company. Yes, prepaid expense is a line item recorded as an asset on the balance sheet. Paying for a 24-month insurance policy for office space with cash upfront.Signing a 12-month lease for office space that requires 6 months of upfront payment.Paying for a subscription for a year upfront because they were offering a large discount.On the balance sheet, current assets decrease as prepaid rent decreases. On the income statement, rent expense is recorded, which increases expenses, and in turn, decreases net income. The second entry, however, does affect both the income statement and the balance sheet. Therefore, there will be no changes in the totals for current assets or total assets. Prepaid rent will increase, while cash will decrease. The initial entry to record a prepaid expense only affects the balance sheet. Effect of Prepaid Expenses on Financial Statements ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |