How Prepaid Expenses Work | Adjusting Entries
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- Опубліковано 29 сер 2024
- 💥Adjusting Entries Cheat Sheet → accountingstuf...
🖊Adjusting Entry Practice Questions → accountingstuf...
Prepaid Expenses are one of the most common forms of Adjusting Entry in Accounting. In this video, you'll learn what a Prepaid Expense is, and I'll show how to account for them correctly, using Journal Entries and T Accounts.
I'm creating a whole mini-series devoted to this topic which will include worked examples for each of these four types of Adjusting Entry...
▪ Intro to Adjusting Entries → • Prepayments and Accrua...
▪ Prepaid Expenses → • How Prepaid Expenses W...
▪ Deferred Revenue → • Deferred Revenue Expla...
▪ Accrued Expenses → • Accrued Expenses Broke...
▪ Accrued Revenue → • Accrued Revenue MADE E...
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Prior to this channel, I used to score hardly 40 or 50 out of 100. But because of your videos with simple explanation, I scored 70 in Finance and 80 in cost accounting. My accounting basics are cleared than ever before. Even I started to teach accounts my friends. And You gained my interest in Accounting. And I have decided to go for CA exams.
BIG THANKS YOU AND KEEP GOING WITH THIS CHANNEL
Wow Rakesh, that is amazing! I'm glad to hear that it's all clicking for you. Thanks for your support and all the best with your CA exams. You'll crush them!!
@@AccountingStuff 👌👌👌👌👌👌👌👌
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Curry
Thank you for this! I'm in a college accounting class right now, and am feeling so overwhelmed. I'm glad I found your channel!
No problem Zach! Sorry to hear that you're feeling overwhelmed, all the best!
Thats sad im im year 10 and looking at the same content
Same
accrual means already happened and inuccrual means its not yet ?
Hell yeah
You take away all the stress of accounting school. Every time I’m a bit lost in my lectures, I have peace of mind knowing there’s a video of yours somewhere that’ll clear things up for me
That's great to hear! Hope it's all going well :)
Genuinely, please never stop making videos like these. You're inspiring so many future accountants. Props to you~
EXACTLY
Yep and this is what we were learning in class today, time to bump up ahead of my class❤️🔥🔥🔥
Haha, perfect timing then! Cheers mate
Best Channel On UA-cam For Accounting !
Thanks Faizan!!
i wish these videos existed when i was still a student! thank you for this good explanation!
No problem Erika, hope it helped :)
Not everyone has a gift for teaching, but you do! Thank you SO much for helping me grasp this!!!
Ahh thank you so much for making these videos! I'm an online student so I practically have to self teach myself through the textbook which is miserable since I'm completely new to accounting. Your videos have honestly made it so much easier for me to understand new concepts. I really appreciate all the effort you put into these videos!!
Thanks Mina, these videos take a lot of work to put together so it makes me very happy to know that you're finding them useful. Good luck with your studies!
I work for a nonprofit, and our CFO just left. I'm having to take over most of his functions and your videos are helping me so much!
That sounds like a tough situation to be in. Best of luck with it all!
I'm in review year in college and feelin like I haven't learned anything over the years. Going back to the basics and build it up from there. Your videos are very helpful. Thank you.
That's great to hear! It always helps to go back over the basics. Best of luck with it all :)
I am new to accounting and I really love your videos, not only contentwise but also their technical quality is just amazing!
Thanks, I appreciate it!
I'm only in high school but your videos are teaching me more than my teacher at the moment. Cheers mate!
No worries my young padawan. May the force be with you!
Amazing, now I understand why prepaid expenses are covered under an asset. The overall expense balance is carried for the annual period, and is being paid monthly to cover the overall expense. Once the annual period is done the expense should be at zero. Thanks for your content sir.
Before this video my mom used to hate me and kick me out of home. But now she love me and asking to come back. Thank you Accounting Stuff!
You are the best. I'm not an accounting student but I've always wondered how to think of prepaid expenses. It's like you read my mind. Turns out there are answers to my problems! This could be the most useful video I've ever watched on youtube. Thank you very much.
Cheers Paul, hope it's all making sense for you!
I love your teaching style. Brief, to the point, understandable, very clean lines. Thank you!
You're welcome :)
Thats a hell of an insurance premium wow! Just got my first assessment back at 100% Thank you for your videos, something about the way you explain things just clicks!
It sure was! Now I've moved to Australia it's much cheaper :)
OMG you cannot imagine how I gain help from this. I'm not gonna lie that I actually studied in a university which is ranked within QS 50 rankings for accounting major. But STILL they don't really explain detailedly how the (insurance) expense will look like in the end. And you show the actual detail process to emphasize each time period, and show how is the final relationship between expense and cash and to cancel the prepaid expense etc. Maybe they think every university student is so super smart not to explain lol they just said DR Prepaid Rent with CR Cash & DR Rent Expense with CR Prepaid Rent.
Anyway I just want to say THANK U SO MUCH for saving time struggling.
Hey Astella, no worries! It's can be helpful to return to the basics from time to time. When studying at University I often felt like I was studying just to pass the exams. I could only remember things in the short term and once the exams were over I'd immediately forget 90% of it.
All the best!
Just started level 3 advanced bookkeeping and had my first collage day yesterday.. We were introduced to it and i seriously couldn't understand it.. This has literally made me understand... Thank you so so much.. Especially with using the example it always helps to visualise for me... So thank you again 🙏🏻
No worries, best of luck with your course!
Literally, how would I even make it through accounting without your channel? Thank you so much for being here and sharing your expertise!!!!
Great to hear that the vids are helping, all the best!
I just watched this video 3x, finally get it! I wish I had found these videos 3 weeks ago when I started my accounting class. This is lovely. Thank you!
Nice one Kellie! Great to hear that it's clicking for you!
Thanks for this video! When you said you were from Vancouver I was a little shook because I'm from there too, and I recognized the landscape you were driving in!
HOW the heck have I only discovered your channel just now?!
Lmao, kinda pissed me off, by myself HAHAHA
Really appreciate the simplicity of your teaching and videos.
Haha, thanks mate!
Your level of anger is nowhere close to mine. I was taking my accounting class in college when all these videos were posted already. Pulled an all nighter for the exam.
I likes your videos because your teaching method is not boring
Thanks Kulwant, I'm glad to hear that you are enjoying the videos!
This guy deserves 10 million subscribers. 🙂
Thanks Abdul!
Thank you for your interesting videos! Accounting stuffs are explained in the best fun way by Accounting Stuff 😊
Thank you for your time and energy in making these videos and making what seems really confusing, less so. I really appreciate your help
Great to hear you're finding them useful :)
i also just wanted to say, ur channel is one of the most valuable channel in my list. thank u for ur honest hardwork and dedication in giving value to us. this is the legit first time i don’t skip ads, it’s the least that i can do to thank u. keep up the good work man!! hope to see u someday in the field of accounting. 😀
Cheers Angelo, I'm happy to hear that you're enjoying the vids :)
Thanks James! I was looking in your channel for closing entries, but I couldn't find any videos. There is another topic you can cover in future videos :) Keep up the good work!
Hey Cesar, thanks for your suggestion. I'll keep closing entries in mind for future vids!
I have the exact same blue Toyota Yaris! Thanks for making great videos, you explain things better than my textbook
Sadly I had to sell it a few years ago. Would love to have another!
Only if I got him as my teacher in my high school, that my basics would have been concrete. Good job man
Thanks for your kind words :)
Lord, please bless this man for his time and efforts. Thanks so much!
You're most welcome :)
what a wonderful explanation. It can not be easier than this. You are amazing skill of making complicated things simple.
Great to hear it's making sense :)
Wow, I just had an aha moment watching this. Thanks so much for your videos, they are my favorite since I found this channel last month :)
Gotta love those moments! Glad it's clicked for you :)
Watching this video in 2022, it's been useful. Thank you for your amazing effort bro!
Great video as usual! Please do a video on understanding financial ratios!
Cheers Mohammad, and thanks for your suggestion!
The exam went well! Thanks for your tips. Great content as usual keep it up
Glad to hear it Patrick!!
Omg you helped me understand adjustment from expenses to the prepaid account. I was stressing a hw problem all day. Thank you so much!
No worries, hope it's making sense
You have no idea how you've helped me lad, Thank you so much and i hope all the best for you. Love from Egypt
Cheers Ahmed, I'm happy to help! All the best :)
Dude...you are the BEST!!! I add your vids to my Watch Later list as my lecturer rambles online
Cheers Alex, all the best with your studies!
Thanks so much man. I'm planning to take on accounting and thanks to you, I have a leg up on the competition now! Vids so easy to understand. Keep it up! More power!
No worries Ejey, all the best!
Thank you for the video, very informative as always. Some accountants in practice debit prepaid expenses and credit accrued expenses payable, then proceed to expense the prepaid expense as time passes, and debit the accrued expenses when they actually made the payments.
I was never an accounting student but studying accounting and bookkeeping without going to college again I began to understand what accounting is and why is it important. I want to be a Bookkeeper someday. Thanks.
Self learning is the way to go! Good on you
I am now taking an Accountancy course, thankyou so much for these videos!
No problem, all the best with your studies!
Thank you so much James!!! I finally understand what prepaid expenses are!
I always Google for knowing knowledge first but I search your channel for knowing accounting knowledge first like this time 😀
Fan from Taiwan 🇹🇼
(Btw really like your British accent!! Also a fan of British accent)
No worries Agnes! Glad it's making sense :)
your video is really easy to understand, even to me as a non-english speaker. this video is really helpful, thank you
Thanks Alice, great to hear it's making sense!
the amount of effort you put in the video is amazing. Great quality videos. Keep them coming.
Thanks Bipul!!
Thank you for these videos. I'm taking accounting basics 1 in my late forties and it's been so long since I was in school. These videos have helped me learn much better than my textbook. Thank you!
No problem Kelly, it's great to hear that these videos are helping you out!
All the best with your course!
@@AccountingStuff thanks!
yup Yup yup , at first i din't know anything about Accountan Because i didn't understand what my college teacher say . And you just pop up into my recomendation . Thanks to you
Great, hope it starts making sense for you!
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Thank you very much for all this love and respect you put into your content! A question - how do the accountants remember to subtract 1/4, 1/12, or whatever? How do they keep all the necessary adjustments in mind?
It helps to keep the accrual method of accounting in mind. Revenue should be recognised as it's earned and Expenses should be recorded as they are incurred.
Ur videos are such an awesome alternative for me like I wish u were my finance teacher
You are so great sir, as your videos are helping me a lot. thanks
What a simple ,effective and great video! thank you so much
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I loved your videos before BUT knowing you're a fellow Vancouverite... makes me love your videos even more :D
Thanks Connie!!
Best accounting channel! Thank you for your amazing work!
Thanks and cheers for your support!!
Your Skin Is So Good. Its Satisfying to watch
Could you do a video on Reversing Entries? Thank you so much for your simple way of explaining and clarifying what are more difficult topics. You are a LEGEND!
Thanks for your suggestion!
Thank you so much for all your help with these informative and entertaining videos! Would you be able to produce a video on the cash flow (operating, investing, and financing activities)?
Hey Ariella, no problem! I've actually made three videos covering the cash flow statement (including those three sections) that you can find in this playlist --> ua-cam.com/video/Xy-yDw0gsgc/v-deo.html
Thank you, my sincere appreciation for your talent and taking the time to share your knowledge!
Cheers!
You rock! Best accounting channel ever. Period!
Cheers Michele!!
Thank yu for this ive been stuck for like a week trying to figure this out
No worries, glad it's making sense :)
the best accounting channel ever
Thanks buddy :)
THANK YOU SM TEACHER FOR CLEARING MY CONCEPTS ..
ITS REALLY HELP FUL .. 💜
❤❤❤ Just what I needed to start my week
Thanks Nathaniel, all the best!
I've learned more in these videos in 1 day than I have in the last 3.5 months of class.
Glad you're finding them helpful! All the best with your studies :)
@@AccountingStuff Just wanted to thank you again for these videos! I got 89% on my bookkeeping I final exam! I wasn't ever able to pull more than a 60% all semester!
@@PlainJanePlants Congrats!! You nailed it :)
You are awesome! Great examples and visuals. Thank you so much for helping me get through my accounting class.
No problem Kat! Best of luck with your studies
You have an excellent way of teaching.go on buddy.
Cheers for the support!
nice! i lived in poco and squamish for a few years
I enjoy your lessons so much
Thanks :)
While waiting for another midterm exam. Grabbing to watch things I missed yesterday but still it's a 51/65..ty for all of this video.
Best of luck!
God bless you, Sir! ❤️
Your your videos are really helpful. I would be really thankful if you can post video on unearned revenues
Here you go: ua-cam.com/video/F1zNQ1wga7o/v-deo.htmlsi=bjMM1UkwWA9r5eOd
THANK YOU SO MUCH FOR THIS PLAYLIST. YOU SAVE MY BRAINCELLS.
No worries, hope you find it helpful!
Super very Clearly explained 👏 👌
This is SO helpful, thank you!
Your videos are super helpful with a confusing topic. Could you do a video on depreciation and contra accounts?
Cheers Lucas, yes I have plans to cover Depreciation in the near future
Can you do a video about what you do with consumables at end of year.
Cheers for your suggestion!
Can I maybe ask a question about it
I also have a question about it . Why does consumables boight during the year get placed in the expense column if youre not sure its all gonna be an expense for the year
Wow, this makes a lot of sense.. Thank you very much
Cheers, happy to help :)
Good to see you back!
Cheers Aaron!
Thank you very much !!! your videos are very helpful.
Thanks...sir. I've come here to review this lecture.
No worries, hope it helps!
Thank You very much James, I want to see the explaining of accounting intermediate. it's very hard , please Do it FOR US.
Thanks for your request!
Hi James. I am slowly going through your videos. They are excellent. A quick question - how do you keep track of what journals you need to make at the end of each month? Do you have a spreadsheet where you enter all the details and then simply move the figures across into your accounting software when the time comes?
I'd usually keep a checklist of the journals that need to be posted on a month / quarterly basis.
Love you bro , am overjoyed
Thank you James, great work.
Cheers John :)
This is amazing and really helpful! Please teach me the whole of the CIMA qualification!! Please can you do a video on irrecoverable debt and allowance for receivables?
Thanks Amy, glad you found it useful. I'll keep your suggestion in mind for future vids
Very informative!
Thanks Erin!
Hi James, I am loving your videos. They are so practical and entertaining - thank you for abandoning physics. I have a question that I would be very grateful if you had the time and inclination to answer, and that is, how would you do a manual journal entry for prepaid car insurance when the sales tax (GST in Australia) is only applied to part of the insurance? Would you split the Insurance Expense into 2 line items for the GST and GST-free portions? Thanks!
Hey Prema, thanks it's great to hear that you're enjoying the videos! Sure thing... I think that you could post that journal entry either way. Although my preference would be to break out into GST and GST-free line items with descriptions alongside each. The more detail the better
Hello James, I would like to know if software from website hosting companies and zoom can be considered a prepaid expense. Have a good one and keep up the goo work!
Are you ok? I just found your channel and your instragram account and I cannot tell you how much you have helped me already. I was beginning my THIRD reading of my Adjusting chapter and was darn close to quitting all together until i found your videos. Its finally starting to make sense. I went to your IG page and it says you have been gone for 144weeks - that's a long time and your followers are asking if you are ok. I sure hope you are. I imagine you are super busy but maybe drop a note somewhere that you are in fact ok. You are making a lot of peoples lives much better and we all really appreciate it!
In the Vietnamese Accounting system, we recognize directly Prepaid Expenses and then allocate Prepaid Expenses to Insurance Expenses for each accounting period.
Great explanation! One question tho. Why don’t we record prepaid expenses immediately when we pay the 2400 dollars in december? That way we don’t need to make an adjusting entry😁 Or is it sole purpose of an adjusting entry when you forgot to do that? Thank you!
I can't just leave this vid without saying my thanks!
Cheers Alfredo, hope it makes sense!
Thank you for video. I have one question. why do we need to credit insurance expense?
You are good.. Thank you
great video!!!
The couple of initial journal entries:
Why if I booked the original payment to Prepaid account directly without going through the insurance expense account? Why reclassify the expenses to prepaid when I could have done:
Dr. Prepaid account 2400
Cr. Cash account 2400
with the rest staying the same?
Is it because the original insurance invoice must hit an expense account by concept or method?
Thanks. Great video.
Your way works too. I put reversed it out of the Expenses account because this happens a lot