What it is
A prepaid expense is a payment made in advance for goods or services the entity will receive in future periods, such as insurance, software subscriptions or rent paid ahead. It is recorded as an asset and expensed as the benefit is used up.
This workbook computes monthly straight-line amortization for each prepaid item from its start date, term and amount, and gives the amortization for the period, cumulative amortization and remaining balance at the period end, with a tie-out to the general ledger.
When to use it
- Monthly close, to post amortization and reconcile the prepaid account.
- Year-end audit or review, as the client schedule for prepaid expenses.
What’s inside
- Inputs: vendor, description, GL account, amount, start date and term in months
- Monthly amortization, months elapsed and amortization for the period
- Cumulative amortization and ending balance per item
- Total that ties to the prepaid balance per the general ledger
- Current / noncurrent split for items extending past 12 months
Standard cited
This template follows US GAAP accrual basis. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use.
Questions
How is a prepaid expense amortized?
Usually straight-line over the period of benefit: divide the amount by the number of months and expense that amount each month. Use a different pattern only if the benefit is consumed unevenly.
Should small prepaids be capitalized?
Many entities set a capitalization threshold and expense small prepayments immediately when the effect is immaterial. Document the policy and apply it consistently.
Related templates
- Accrued Expenses Schedule (Excel)
- Month-End Close Checklist (Excel)
- Trial Balance Template with Mapping (Excel)
Last updated 11/04/2026. All free templates.