Expenses

Services that are used up by a business but payment has NOT been made

It is the amount owing and to be recorded as a current liability in the financial position

Expense incurred (used up) for the year = Expenses paid + Expenses payable (used up but not paid)

Expenses incurred is recorded in the financial performance to calculate the accurate expenses or services used up

Expenses that are paid in advance before services are used

As the services can be used later, it is recorded as a current assets in the financial position

Expenses incurred (used up) for the year = Expenses paid - Prepaid expenses (Paid but not used)

Expenses incurred is recorded in the financial performance to calculate the accurate expenses or services used up

Step 1: Record amount of expense paid

Dr Name of Expense (E+)

Cr Cash at Bank (A-)

Step 2: Adjust for prepaid expense

Dr Prepaid Name of Expense (A+)

Cr Name of Expense (E-)

Step 3: Record the correct amount of expense incurred

Dr Income Summary (Correct expense to be recorded in financial performance)

Cr Name of Expense