Hello - I have a question about prepaids.
If an invoice that stipulates "prepay" in the terms is entered into our system on the last day of a month as Debit to Prepaids, Credit to Accounts Payable, but is not acutally paid until the next month, should it really have been booked to prepaids? On one hand, one might say we were liable on the last day of the month, but on the other hand, the definition of prepaid in my accounting book says "amount paid in cash for future benefit" (i.e., it does not say amount payable now for future benefit). I guess the real question is how literally do we take the word "cash" in the definition of prepaids? Does anyone know what does GAAP says?? Tried to look on their website but could not find anything...
Thanks!
If an invoice that stipulates "prepay" in the terms is entered into our system on the last day of a month as Debit to Prepaids, Credit to Accounts Payable, but is not acutally paid until the next month, should it really have been booked to prepaids? On one hand, one might say we were liable on the last day of the month, but on the other hand, the definition of prepaid in my accounting book says "amount paid in cash for future benefit" (i.e., it does not say amount payable now for future benefit). I guess the real question is how literally do we take the word "cash" in the definition of prepaids? Does anyone know what does GAAP says?? Tried to look on their website but could not find anything...
Thanks!