Prepaid Expense lets you record advance payments for goods or services that will be consumed over a future period — such as insurance, rent, subscriptions, or annual maintenance. Amounts are booked as prepaid assets and recognized as expenses over time through linked Expense entries (there is no automatic amortization schedule).
The Prepaid Expense list shows all prepaid entries with account, date, payment account, payment mode, amount, remaining prepaid balance, and status.
List columns
`ID`, `Number #`, `Prepaid Ac`, `Date`, `From Ac`, `Credit Ac`, `Pay. Mode`, **Amount**, `Prepaid Balance`, `Status`
Quick filters
| **Filter** | **Shows** |
|------------|-----------|
| Default | All prepaid expenses except Cancelled |
| Approved | Approved prepaid expenses |
| Closed | Closed prepaid expenses |
| Draft | Draft prepaid expenses |
| Cancelled | Cancelled prepaid expenses |
Header actions
| **Action** | **Description** |
|------------|-----------------|
| New | Opens the new prepaid expense form |
Click a row to open the prepaid expense in view mode. Select one or more rows to show footer actions: **edit**, **delete**, and **view**.
List View
Quick Start — Create a Prepaid Expense
1. Navigate
Go to Accounts → Prepaid Expense from the left menu.
2. Create new prepaid expense
Click New to open the prepaid expense form.
3. Fill in details
Enter the date and select Payment mode.
Select the Prepaid Expense Acc and enter the Amount.
Fill in the payment account fields shown for your payment mode.
Optionally set Per Expense Taxable Amount for default expense allocation amounts.
4. Save
Save — saves as a draft.
Reset — clears the form.
Cancel — closes the form without saving.
After saving, approve the prepaid expense from the view screen to post the accounting entry.
Header Fields Reference
| **Field** | **Description** |
|-----------|-----------------|
| date | Date the prepaid payment was made. Mandatory. |
| Payment mode | How the prepaid amount was paid. Mandatory. Options: Cash, Bank, Credit, Digital Wallet. |
| Prepaid Expense Number | Manual bill number. Hidden when auto-numbering is enabled. |
| Prepaid Expense Acc | Prepaid expense account where the amount is recorded as an asset. Mandatory. |
| From Account | Cash, bank, or wallet account paid from. Required when payment mode is Cash, Bank, or Digital Wallet. Hidden for Credit. |
| Credit Account | Required when payment mode is Credit. Hidden for other modes. |
| Cost center | Optional cost center assignment. |
| Taxes | Applicable tax. Optional. |
| Tax Amount | Tax amount. Optional; placeholder shows Not required. |
| Amount | Total prepaid amount (tax inclusive if applicable). Mandatory. |
| Per Expense Taxable Amount | Default taxable amount to allocate when creating linked expenses. Optional. |
| Supplier Invoice Number | Supplier invoice or reference number. Optional. |
| Notes | Optional remarks. |
View-only balance fields
| **Field** | **Description** |
|-----------|-----------------|
| Taxable Amount | Amount excluding tax. |
| Credit Balance | Outstanding payable balance (Credit payment mode only). |
| Prepaid Balance (Without Taxes) | Remaining prepaid balance after expense allocations. |
| Prepaid Balance | Shown in list as remaining balance to be recognized as expense. |
Payment Modes
| **Payment Mode** | **Description** | **Key fields shown** |
|------------------|-----------------|----------------------|
| Cash | Paid immediately from a cash account. Auto-closes when fully allocated. | From Account |
| Bank | Paid from a bank account. Supports payment instruments (e.g. Bank (NEFT)). | From Account |
| Credit | Prepaid amount owed to supplier; paid later via Payment Voucher. Stays open with credit balance until paid. | Credit Account |
| Digital Wallet | Paid from a digital wallet account. Supports payment instruments. | From Account |
Payment instruments
When configured, Bank and Digital Wallet modes show instrument-specific options. See Payment Instruments.
After approval
Credit mode sets Credit Balance to the full amount until paid via Payment Out.
Prepaid Balance tracks remaining amount to be allocated to expenses.
Prepaid expense auto-closes when all amount is allocated to expenses and credit balance is zero.
Link to Expense
Prepaid amounts are recognized as expenses through the Expense module using Prepaid payment mode.
From Prepaid Expense view
Use Create Expense from the more menu on an approved or closed prepaid expense. This opens a new Expense form prefilled with:
Payment mode → Prepaid
Prepaid Expense Id → linked to this prepaid record
Amount → from Per Expense Taxable Amount
Expense account → from the prepaid expense account's linked expense account
From Expense module
When creating an expense with Payment mode = Prepaid:
Prepaid Expense Id field appears and is mandatory.
Only approved prepaid expenses with remaining balance are shown.
From Account, Credit Account, Taxes, and Tax Amount are hidden.
On expense approval, the prepaid balance is reduced. When total allocations reach the prepaid amount, the prepaid expense auto-closes.
Credit prepaid — Payment Out
For prepaid expenses created with Credit payment mode, use Payment Out from the more menu to create a Payment Voucher against the outstanding Credit Balance.
Actions & Status
Statuses
| **Status** | **Description** |
|------------|-----------------|
| Draft | Saved but not yet approved. Can be edited or deleted. |
| Approved | Finalized and posted. Balance available for expense allocation. |
| For Revisal | Sent back for correction. Can be edited or deleted. |
| Cancelled | Voided. Blocked if linked expenses or payment vouchers exist. |
| Closed | Fully allocated or paid. No remaining balance. |
List actions (footer bar when rows selected)
| **Action** | **When available** | **Notes** |
|------------|-------------------|-----------|
| edit | Draft, For Revisal | Single row only |
| delete | Draft, For Revisal | Supports multi-select |
| view | All statuses | Single row; row click also opens view |
View toolbar actions
| **Action** | **When available** | **Notes** |
|------------|-------------------|-----------|
| Approve | Draft | |
| Edit | Draft, For Revisal | |
| Delete | Draft, For Revisal | |
| clone | All statuses | Hidden when clone is disabled in user settings |
More menu (⋮)
| **Action** | **When available** | **Notes** |
|------------|-------------------|-----------|
| Payment Out | Approved | Credit payment mode only, when Credit Balance > 0 |
| Create Expense | Approved, Closed | Opens new Expense prefilled from this prepaid record |
| Cancel | Approved, Closed | Blocked if linked expenses or payments exist |
| Master Update | Approved, Closed | See Master Update below |
| Add/Update Note | All statuses | Updates Notes only |
| Print | All statuses | |
Master Update
Master Update lets you change the date on an approved or closed prepaid expense. Open the record, click the more menu (⋮), and select Master Update.
When available: Approved or Closed status only.
Dialog actions: Confirm, Cancel
Fields that can be master-updated
| **Field** | **Required** | **Description** |
|-----------|--------------|-----------------|
| Date | Optional | Prepaid expense date. Updating also updates the linked journal date. |
Not master-updatable: payment mode, accounts, amount, taxes, per-expense amount, supplier invoice number, or notes.
View Tabs & Side Panels
When you open a prepaid expense in full view (not in a small modal), the right side shows tabbed panels. Click the expand icon on a tab to open the same data in a larger modal.
Top panel
| **Tab** | **What it shows** |
|---------|-------------------|
| Summary | Linked documents and related account transactions for this prepaid expense. See Account Transactions. |
| Journal Info | Accounting journal entries posted by this prepaid expense. Requires journal access. See Journal Report. |
Middle panel
| **Tab** | **What it shows** |
|---------|-------------------|
| Payments | Payment vouchers recorded against this prepaid expense. |
Bottom panel (all transactions)
| **Tab** | **What it shows** |
|---------|-------------------|
| History | Activity log — who created, approved, edited, or cancelled the prepaid expense and when. |
| Attachments | Files uploaded to this prepaid expense. |
Best Practices
Set Per Expense Taxable Amount: Define the default monthly or periodic allocation amount to speed up expense creation.
Use Create Expense: Allocate prepaid balances through the Expense module rather than manual journal entries.
Track Prepaid Balance: Monitor the Prepaid Balance column to see remaining unallocated amounts.
Pay credit prepaids promptly: Use Payment Out to settle Credit-mode prepaid expenses against suppliers.
Cancel linked records first: Cancel or unlink expenses and payment vouchers before cancelling a prepaid expense.
FAQ
What is the difference between Amount and Prepaid Balance? Amount is the total prepaid payment. Prepaid Balance is the remaining amount not yet recognized as expense through Expense entries.
How do I recognize prepaid amounts as expenses?
Use Create Expense from the prepaid view, or create an Expense with Prepaid payment mode and select the prepaid expense.
Why can't I cancel this prepaid expense?
Cancel is blocked when approved expenses or payment vouchers are linked. Cancel those first, then cancel the prepaid expense.
Which fields can I change with Master Update? Date only. Amount and accounts cannot be changed through Master Update.
When does a prepaid expense close automatically?
When all amount is allocated to expenses and any credit balance is fully paid.
Can I use payment instruments for prepaid expenses?
Yes, for Bank and Digital Wallet payment modes when payment instruments are configured.
Journal on approve?
Yes — debits prepaid asset account per payment mode.
Partial recognition?
Multiple expense entries until prepaid balance is zero.
Related Topics & Videos
Related documentation
Expense — recognize prepaid amounts using Prepaid payment mode.
Payment Voucher — pay credit-mode prepaid expenses via Payment Out.
Payment Instruments — configure payment methods for Bank and Digital Wallet modes.
