USA Prepaid expense


Joined
Jul 22, 2015
Messages
1
Reaction score
0
Country
United States
I am new to my current job and am in the process of really digging into our financial statements to check for accuracy. I noticed a large balance in our prepaid expense account and after researching I discovered a JE from 12/31/2012 that debited the prepaid expense account. Unfortunately the previous person never entered the JE to move this to an expense account. My question is, do I just go back and create a JE on 1/1/2015 to debit retained earnings and credit prepaid expense?
 
Ad

Advertisements

kirby

VIP Member
Joined
May 12, 2011
Messages
1,823
Reaction score
241
Country
United States
First, show your proof to your boss and recommend an adjustment. Then follow whatever boss directs. What boss should say is to adjust in current accounting month. That is DR Expense and CR prepaid expense.
 
Ad

Advertisements

smallbushelp

VIP Member
Joined
Jun 22, 2015
Messages
191
Reaction score
20
Country
United States
How large of a balance is it? You should determine if it's material to the prior years financial statements and tax returns. If so, would it be necessary or meaningful for the company to post a prior period adjustment? If the answers are yes, then the best course of action would be a prior period adjustment. But if not, then a current period adjustment would be fine. As the accountant, be prepared with your recommendation when you approach your boss.
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Similar Threads


Top