PURPOSE / SCOPE:
Identify and record prepaid expenses as an asset, which will then be expensed in the month which the value/benefit applies to.
POLICY AND PROCEDURE:
Prepaid threshold is set at $5,000, any expenses below this amount are considered immaterial and will be expensed in the month paid. Expenses above the threshold, where the benefit will happen in the future or exceeds the month they were paid, needs to be recorded as prepaid asset.
Prepaid assets are reviewed monthly to determine the correct amount and time period the expense should be recognized for. A journal entry will be created to move the appropriate portion of the prepaid asset to the appropriate expense account.
PRIMARY POLICY OWNER: