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The Complete Idiot's Guide® To Accounting by Lita Epstein, Shellie L. Moore

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Booking Prepaid Expenses

Some expenses must be paid prior to the business using the paid-for item. One common prepaid expense is insurance. Most insurance companies require you to pay for insurance 6 to 12 months in advance. Another common prepaid expense is rent. Some retail stores are expected to pay rent quarterly rather than monthly.
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The prepaid expense account is shown in the asset section of the balance sheet. Because this prepaid expense is a short-term asset that is used in less than 12 months, you would place it before the land account. Give it a number of 1250 to make it appear after the inventory account on the balance sheet. The ...

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