Prepayment: Difference between revisions
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imported>Doug Williamson (Expand definition. Sources: linked pages.) |
imported>Doug Williamson (Add example.) |
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It is a prepaid expense. | It is a prepaid expense. | ||
<span style="color:#4B0082">'''''Example: Venue hire'''''</span> | |||
We book a venue for a function. | |||
And pay 50% of the hire fee in advance. | |||
The 50% paid in advance is an ASSET for us. | |||
We are going to enjoy the use of the venue in future, but it has already been paid for. | |||
So the 50% already paid represents a future economic benefit. | |||
Revision as of 15:52, 9 September 2020
1. Banking.
The non-contractual early repayment by bank customers of, for example, fixed rate mortgages.
2. Accounting.
An amount paid in advance for a financial benefit, represented by an asset in the organisation's balance sheet.
It is a prepaid expense.
Example: Venue hire
We book a venue for a function.
And pay 50% of the hire fee in advance.
The 50% paid in advance is an ASSET for us.
We are going to enjoy the use of the venue in future, but it has already been paid for.
So the 50% already paid represents a future economic benefit.
