You shift $2,400 out of Cash on the balance sheet and report $2,400 as a Prepaid Expense instead. Every month, when you get the work you paid for, you reduce the prepaid expense entry by $400.

Prepaid expenses provide many benefits for individuals. On the practical side, it is best to fully pay for a service or product ahead of time, especially if it is an expense you cannot avoid.

Deferred expenses and prepaid expenses are advance payments on a company’s balance sheet, but there are some clear differences between the two. Time is one of the key differentiators between the ...

Identify any expenses that are prepaid, or paid in advance of actually incurring the expense. An example of this is insurance, if you pay a six-month premium in advance. Five months of the premium ...

In recording it on the balance sheet, the company will need to log it as a prepaid expense, then distribute the expense evenly over the next 12 months. This is the opposite of an accrued expense, ...