Month-end close Updated November 2026

Prepaid expense schedule

A prepaid schedule lists every prepayment (insurance, rent, software, subscriptions) with the amount paid, start and end dates and the monthly expense, and shows the remaining balance for each. The sum of remaining balances must equal the Prepaid Expenses account in the ledger after the month's amortization entry is posted.

Syntax

Monthly expense = Amount paid / Number of months; Remaining = Amount paid - Months elapsed x Monthly expense; Sum of remaining = GL Prepaid Expenses

Part	What it is
`Payment`	Dr Prepaid Expenses / Cr Cash
`Monthly release`	Dr Expense / Cr Prepaid Expenses
`Term`	Number of months the payment covers; partial first month pro-rated if material

Examples

Insurance 2,400 paid Jan 1 for 12 months

Result: Payment: Dr Prepaid Insurance 2,400 / Cr Cash 2,400. Each month: Dr Insurance Expense 200 / Cr Prepaid Insurance 200. After March: remaining 2,400 - 3 x 200 = 1,800.

Schedule at Mar 31: insurance remaining 1,800; software 1,200 paid Mar 1 for 12 months, remaining 1,100

Result: Total 2,900 must equal the Prepaid Expenses GL balance.

GL shows 3,100 against a schedule of 2,900

Result: Difference 200: March insurance amortization was not posted. Post Dr Insurance Expense 200 / Cr Prepaid Insurance 200.

Common mistakes

Expensing the whole payment when paid: profit is understated this month and overstated for the rest of the term.
Leaving fully amortized lines on the schedule with zero balance: remove them so the schedule stays readable.
Not pro-rating a mid-month start: for large policies, use days or half-months to avoid a lumpy first month.

Practice Prepaid expense schedule

These drills check your answer on live data, free, no account needed.

Rental company closeClassify every line, enter both adjusted balances, then choose the journal entry the company must record for each item that affects its books.
Bakery year-endClassify every line, enter both adjusted balances, then choose the journal entry the company must record for each item that affects its books.

Questions

What qualifies as a prepaid expense?

A payment for goods or services to be received in future periods: insurance, rent paid in advance, annual software licences, maintenance contracts, deposits that will be applied to future charges.

Is prepaid expense a current asset?

Yes for the portion to be used within 12 months. Anything beyond that is a non-current asset.

Accruals at month-endHow to accrue expenses incurred but not yet billed and revenue earned but not yet invoiced at month-end, with worked entries and the reversal next month.
Balance sheet reconciliationA balance sheet reconciliation supports each ledger balance with independent evidence: a bank statement, an aging, a schedule or a roll-forward. Sign-off.
Month-end close checklistA month-end close checklist in sequence: cutoff, bank and card reconciliations, AR and AP, accruals and prepaids, fixed assets, balance sheet recs, lock.