Is prepaid a credit balance?

Should a prepaid account have a debit or credit balance?

To create your first journal entry for prepaid expenses, debit your Prepaid Expense account. … This account is an asset account, and assets are increased by debits. And for every debit, there must also be a credit. Credit the corresponding account you used to make the payment, like a Cash or Checking account.

What accounts has a credit balance?

The accounts that have a normal credit balance include contra-asset, liability, gain, revenue, owner’s equity and stockholders’ equity accounts.

How do you record prepaid expenses?

When first recording the prepaid expense entry, you should debit the asset account for the amount paid and subtract the same amount from your cash account. Using the above example, you would add $6,000 in assets to your prepaid insurance account and credit $6,000 from your cash account.

Where are prepaid expenses on balance sheet?

Generally, the amount of prepaid expenses that will be used up within one year are reported on a company’s balance sheet as a current asset. As the amount expires, the current asset is reduced and the amount of the reduction is reported as an expense on the income statement.

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Is prepaid insurance debit or credit in trial balance?

Prepaid insurance is usually charged to expense on a straight-line basis over the term of the related insurance contract. When the asset is charged to expense, the journal entry is to debit the insurance expense account and credit the prepaid insurance account.

Can a prepaid account be negative?

Technically, a negative liability is a company asset, and so should be classified as a prepaid expense.

Which of the following is not a credit balance?

Answer: drawing account is the answer.

Which account does not have a credit balance?

Expense accounts have a normal debit balance and do not have a normal credit balance.

What is meant by credit balance?

A credit balance on your billing statement is an amount that the card issuer owes you. Credits are added to your account each time you make a payment. … If the total of your credits exceeds the amount you owe, your statement shows a credit balance. This is money the card issuer owes you.