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Cpt acc prb: prepaid exp

ad95 (none) (117 Points)

03 December 2012

Q.a club paid 1800 subcription fees out of which 400 is prepaid .

ans . p&l is debited with 1400

& 400 is shown as current asset

I want to know why after paying 1800 as expense,why 400 is still shown as asset

Please clarify?

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3 Replies

Ashwini Kumar Rohilla (M.Com and CA-FINAL) (949 Points)
Replied 03 December 2012

Hey Friend, as we study in 11th Standard this is very simple point

Prepaid means Money which is paid during the year but not related to this year in other way, money paid in advance...

In your question answer is also given. money which is paid in advance is our assets that's why Rs. 400 is shown as assets.....

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Yogesh Bhandari (CA FINAL Student) (429 Points)
Replied 03 December 2012

Actual Expense is Rs. 1400 for the relevant period (current period) and prepaid exp. of Rs. 400 is relevant for upcoming /future periods.
P&L is prepared for relevanr period (current period), so expenses should be related to that period.

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Sarvesh (student) (287 Points)
Replied 03 December 2012

coz its 4 nxt year bro.... 400 is of nxt yr n its should b debited in nxt year only, d cash goes out is 1800 of wich 1400 is of dis yr ( subscrptn payable amunt ) n in nxt yr also subscrptn to b paid vl b 1400( assumed same amunt) but d actual cash paid vl b 1000 only n blnc 400 vl b trfsrd frm prepaid acc*nt ....

Rs. 400 v had paid in advance n its must b included in current assets ( as its paid in advance, normally in nxt yr if whole amunt v hv 2 pay vl b 1400 den cash goes out vl b 1400 but in dis case only 1000 n 400 vl b of last yr i.e prepaid )

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