Quickbooks and PrePaid Expenses

This post is to cover how to handle prepaid expenses in Quickbooks.  This can cover big items like insurance all the way to smaller items like IPASS tolls.  We will use tolls as our example but the process applies to any prepaid expense.  We will accomplish this in two steps:

1. Step One - is to record the prepayment.  In our toll example, we set up with IPASS the ability for them to charge to our debit card when a minimum amount is reached, when our account is down to $50.00 they replenish the account by charging our debit card $100.00.  This will insure that our drivers never get ticketed for not paying a toll.  To record this "auto-replenishment" we will use the "write check" feature of Quickbooks.  The check will be written to the toll company from the checking account used with our debit card.  The account we will use is the "Prepaid Tolls" account.
2. Step Two -This step is to record the transactions when the drivers are charged for tolls.  Monthly we receive a statement from IPASS showing all the charges for tolls.  When you receive this statement you will record each line item on the statement as a toll expense in the following manner. Unfortunately we have to use a general journal entry so please watch making this transaction very carefully.  Make sure you enter the current date.  For the Entry number please use “IPASS” followed by the month of the entry, you should have one per month.  Then you will Credit “Prepaid Tolls” account by the total amount of the invoice and then create one Debit line entry for each item (expense) on the IPASS invoice.       
   

 To see the effects of these entries let's look at the Balance Sheet and the Profit & Loss Statement

Profit & Loss Statement - Here you can see the toll expenses that were incurred in the period.

Balance Sheet - Here you can see the prepaid amount that is remaining.
              
I hope you found this helpful!  If you have any questions or comments please leave them below or send me an email at dwalker@endurancemcs.com