How to record prepaid expenses in accounting using the accrual basis.
It covers the
Highlights:
The purpose of an outline
[00:00:00]
Introduces the topic and the miniseries on adjusting entries
Defines a prepaid expense as a
The car insurance example
[00:01:10]
Shows the payment of $2,400 for a 12-month policy in December 2018
Explains the problem of overstating expenses under accrual accounting
The first adjusting entry
[00:04:31]
Clears out the insurance expense account in December 2018
Records a prepaid expense asset in the balance sheet
The monthly adjusting entries
[00:06:18]
Releases the prepaid expense to the income statement as the policy is consumed
Shows the impact on the T accounts and the timeline for each month
Link: https://youtu.be/RE7wrflFOGA
Created: 2023-12-09
