Prepayment: Difference between revisions

From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson
(Add example.)
imported>Doug Williamson
(Layout.)
 
(One intermediate revision by the same user not shown)
Line 11: Line 11:




<span style="color:#4B0082">'''''Example: Venue hire'''''</span>
:<span style="color:#4B0082">'''''Example: Venue hire'''''</span>


We book a venue for a function.
:We book a venue for a function.


And pay 50% of the hire fee in advance.
:And pay 50% of the hire fee in advance.






The 50% paid in advance is an ASSET for us.
: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.
: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.
:So the 50% already paid represents a future economic benefit.




Line 33: Line 33:
* [[Early Repayment Charge]]
* [[Early Repayment Charge]]
* [[Extension risk]]
* [[Extension risk]]
* [[Prepaid expense]]
* [[Prepayment risk]]
* [[Prepayment risk]]
* [[Prepayments]]
* [[Prepayments]]

Latest revision as of 00:50, 2 January 2021

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.


See also