This relates to prepayments etc.
I know that prepaid expenses are deducted from the year's expenses, however I don't get the following:
What's the entry when we PAY in advance?
Is it:
Dr Prepayment (Asset), Cr Cash
OR do we first go like:
Dr Exp., Cr Cash and at year-end: Dr Prepayment (Asset), Cr Exp.?
And if we do go by the second route, then when we RECEIVE payment in advance, we go like:
Dr Cash, Cr Income THEN Dr Income, Cr Prepaid Income (Liability)
OR simply: Dr Cash, Cr Prepaid Income?
I apologize for wasting your time with all this but do prepaid expenses NEVER appear with eg cash paid?
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