Prepaid Expenses in Journal Proper

 

Meaning of Journal Proper

Journal proper refer to the special types of journals which occur occasionally.

These are also known by subsidiary journals.

There are certain types of transactions which are not recorded in other subsidiary books but for the systematic recording.

Systematic recording of all such transactions are made under journal proper by following rules of double entry system of book-keeping.

Some examples of such transactions can be given as below:

Opening entries

Closing entries

Transfer entries

Adjustment entries (outstanding, prepaid, accrued, advance income)

Rectification entries

No special journal (free sample, loss by fire etc)

Rare transaction

  

Prepaid or Advance Expenses

Prepaid means paid in advance.

Sometime a person or business organization has to pay amount in advance to complete or get complete the work. 

It is also called as un-expired costs, which typically expire or get used up in the near future.

Some examples are prepaid rent, prepaid insurance and prepaid salaries etc.

Expenses paid for the future period are treated as current asset or advance till expenses incurred.

It is deducted from related entry and is shown in assets side of balance sheet.

 

PROBLEM: 6A

BKB Impex has following extracted data:

Office rent paid Rs 36,000. Out of this, Rs 6,000 was for advance.

Required: (1) Journal entry; (2) Show in profit and loss account and balance sheet 

Journal Entry

Journal Entry

In the book of BKB Impex

Date	Particulars		LF	Amount	Amount
	Rent account Advance rent account           To Cash account (Being- rent paid and paid in advance)	Dr		30,000 6,000	36,000

 

Profit and Loss Account

Particulars		Amount	Particulars	Amount
To Rent        Less: Advance	36,000 (6,000)	30,000

 

Balance Sheet

Liabilities	Amount	Assets		Amount
		Current assets: Advance rent		6,000

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PROBLEM: 6B

You have these extracted data:  

Out of advance commission paid of Rs 50,000 expired this year Rs 30,000.

Required: (1) Journal entry; (2) Show in profit and loss account and balance sheet 

 

Journal Entries

Date	Particulars		LF	Amount	Amount
	Advance commission expired account           To Advance commission account (Being- advance commission expired)	Dr		30,000	30,000

 

Profit and Loss Account

Particulars		Amount	Particulars	Amount
To Advance commission expired		30,000

 

Balance Sheet

Liabilities	Amount	Assets		Amount
		Loan and advance: Advance commission      Less: Expired	50,000 (30,000)	20,000

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PROBLEMS AND ANSWERS

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = 

Basic Problem: 6          PREPAID EXPENSES

The following transaction is given you by BC Furniture House:

1 March: Rent paid in advance Rs 15,000.

10 March: Advertisement paid in advance Rs 8,000 by cheque.

22 March: Prepaid wages Rs 10,000.

28 March: Salary paid Rs 45,000; out of salary paid Rs 5,000 is in advance.

31 March: Insurance paid Rs 7,000 by cheque in which Rs 2,000 is advance.

Required: Journal entries

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