Prepaid expenses
Prepaid expenses and accrued income record payments made in the current year that are expenses of a later year, as well as income already earned but not yet invoiced.
Definition
The classic case is an annual insurance premium paid in October for twelve months: three months are an expense of the current year, nine months belong to the next and appear as an asset on the balance sheet at the reference date.
Conversely, work started but not yet billed also belongs here. In service businesses this is often the largest accrual item and the one most rarely booked.
Where to read it
What the software must be able to do
What helps is an accrual that arises automatically from an invoice carrying a service period. Without that, the item stays a reminder task at year end.
Checked Aug 2026
More terms under Bookkeeping and retention: Accrual principle Accrued liabilities Annual accounts Association accounting Balance sheet Balance sheet total Book value Break-even point Business assets Business expenses Cash book Cash flow statement Cash receipts Contribution margin Cost centre Current assets Debit and credit Depreciation Double-entry bookkeeping Duty to keep accounts EBIT EBITDA Equity Equity ratio Financial year Fixed assets Fixed costs Foreign currency General ledger Gross profit Hidden reserves Income statement Inventory count Journal Journal entry Liabilities Liquidity Loss carry-forward Membership dues Net profit Opening balance sheet Overheads Pass-through item Provision Record-keeping ordinance Reserves Retained profit Simple accounts Swiss SME chart of accounts Tamper resistance Turnover Value adjustment Variable costs Volunteer-run structure Voucher Year-end closing modules