What is a Prepaid Expenses Journal Entry?

The prepaid expenses journal entry records the initial payment for future goods or services as an asset on the balance sheet. Debit the Prepaid Expense account to increase the asset value, and credit the Cash or Bank account for the amount paid. As the prepaid expense is used or consumed, it is gradually expensed through adjusting entries, reducing the Prepaid Expense account and transferring the expense to the Income Statement.