Pay as you go Expenditure: Definition and Example

What Is a Prepaid Cost?

A pay as you go expense is an expenditure that has been paid out for in advance but not but incurred. In business, a pay as you go cost is recorded as an asset on the harmony sheet that final results from a company making advance payments for items or providers to be acquired in the long run.

Pay as you go fees are originally recorded as assets, but their price is expensed more than time on to the income statement. Contrary to common expenses, the small business will receive a thing of value from the pay as you go expenditure around the system of various accounting intervals.

Essential Takeaways

  • In organization accounting, a prepaid price is any good or assistance that has been paid out for but not still incurred.
  • Pay as you go fees are recorded on the harmony sheet as an asset, most frequently as a recent asset.
  • Over time, prepaid charges are expensed onto the profits statement.
  • GAAP stipulates that expenditures should be recorded in the very same period that the asset delivers its benefit.
  • Typical pay as you go fees contain insurance policy, leased office machines, advertising and marketing, authorized
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