Can you think of other scenarios or examples of prepaid expenses?
Suggested answers to practice activity 6.7
Examples of prepaid expenses are:
i. Rent expense of ₦38,500 is due for payment on 30 June 2018. It was paid on 31 March 2018. The financial year of the business ends on 31 March every year.
ii. Electricity bill of ₦3,200 is due for payment on 31 March 2018. It was paid on 31 January 2018. The financial year of the business ends on 28 February every year.
iii. Salary expense of ₦30,000 is due for payment on 30 April 2019. The cost was paid on 31 March 2019. The financial year ends on 31 March every year.
iv. Cooling expense of ₦6,000 is due for payment on 31 July 2019. It was paid on 31 May 2019. The financial year ends on 30 June 2019.
v. Insurance expense of ₦18,000 was paid through the bank on 30 June 2018. The insurance expense amounting to ₦9,000 was the amount that ought to be paid on the same date. The financial year ends on 30 June 2018.
On your own, can you think of more examples of prepaid expenses?
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