Such expenses which are concerned with the next financial year but have been paid in the current year are called prepaid expenses. Prepaid expense journal entry is recorded by debiting the particular expense and crediting cash. Prepaid Expenses are also known as Unexpired expenses or Advance Expenses.
Prepaid Expenses Journal Entry
Example 1: Out of the rent paid this year, Rs.5,000 is related to next year.
Solution:
Example 2: Interest paid in advance Rs.500.
Solution:
