• What is a prepaid expense?

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    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    A prepaid expense is expenditure you incur for things to be done (in whole or in part) in a later income year. If expenditure is incurred for something to be done in full within the same income year, it is not a prepaid expense to which the prepayment rules apply.

    Example

    Expenditure not constituting a prepayment

    Jasmin is a solicitor. On 1 July 2001, she paid $1,500 annual subscription for the monthly provision of a professional journal. The subscription covers the period 1 July 2001 to 30 June 2002. Because the thing to be done under the agreement-the provision of the professional publication-will be completed wholly within the expenditure year the prepayment rules will not apply.

    Last modified: 18 Jun 2002QC 27429