Recording Prepaid Expenses and Recognizing Them Monthly with Recurring Journal Entries

Prepaid expenses are amounts you pay in advance for an upcoming period, such as a year’s rent, insurance, or an annual subscription. The correct accounting treatment is to record the amount as an asset when you pay it, then charge part of it to expenses every month. This guide explains how to do this in the system, and how to make the monthly recognition journal entry recur automatically.

The steps at a glance

Step	Journal entry
1. Create a Prepaid Expenses account under current assets	—
2. An expense for the full amount on the prepaid expenses account	Debit prepaid expenses 12,000 / Credit the treasury 12,000
3. A journal entry for the first month’s expense	Debit rent expense 1,000 / Credit prepaid expenses 1,000
4. Make the journal entry recur monthly until the end of the period	The same entry is created automatically every month

Step 1: Create the prepaid expenses account

There’s no default account for prepaid expenses, so create it once:

1. Open Accounting › Chart of Accounts.
2. Open Assets › Current Assets, and click Add Account.
3. Choose the Account Type: Sub-Account.
4. Enter the Code and Name (such as: Prepaid Expenses – Rent), and make sure the Main Account is current assets and the Type is Debit.
5. Save.

Step 2: Record the payment with an expense

1. Open a New Expense.
2. Enter the Amount 12,000, the Date 01/01/2026, and the Treasury.
3. In Journal Account, choose Prepaid Expenses – Rent (not an expense account).
4. Add the landlord in Vendor or Supplier, attach the contract or receipt, and save.

Account	Debit	Credit
Prepaid Expenses – Rent	12,000.00
Treasury		12,000.00
Total	12,000.00	12,000.00

Step 3: The journal entry recognizing the first month’s expense

1. Open Add Journal from journal entries.
2. Date: the last day of the first month (31/01/2026) or its first day, depending on your accounting policy.
3. Description: “Charging January’s rent expense from prepaid expenses”.
4. First line: Rent Expense (an account under expenses) — Debit 1,000.
5. Second line: Prepaid Expenses – Rent — Credit 1,000.
6. Click Save (so the journal entry is issued, not a draft).

Account	Debit	Credit
Rent Expense	1,000.00
Prepaid Expenses – Rent		1,000.00
Total	1,000.00	1,000.00

Step 4: Make the journal entry recur monthly

1. Open the journal entry you created in step 3, and click Make Recurring.
2. Enter the details:

• Name: such as “Prepaid rent charge 2026”.
• Start Date: the date of the second month’s journal entry (such as 28/02/2026 or 01/02/2026), because the first month’s entry already exists.
• Frequency: 1 Month(s).
• End Date: the date of the last month’s journal entry (such as 31/12/2026). Note: it shows today’s date by default, so change it.

3. Save.

The system creates the journal entry automatically on each recurrence date, with the same accounts, amount, description and cost centers, dated on the recurrence date. If the start date is in the past, the entries due up to today are created as soon as you save.

Following up on and stopping recurring journal entries

• From the journal entries, click Recurring Journal Profiles to view all recurring profiles.
• On the profile page: the Next Date, the frequency, the main journal entry, the start and end dates, the previous journal entry, and a tab with all the entries created.
• Edit: to change the name, frequency, end date or next date.
• Suspended to stop the recurrence temporarily, and Resume to restart it.
• Delete the profile to stop the recurrence; this doesn’t delete the journal entries already created.
• The status shows as Active, Suspended, or Expired after the end date.

Why not use a recurring expense?

	Recurring expense (from the expense)	Recurring journal entry
What it creates	A new expense every period.	A journal entry every period.
Journal entry	Debit the expense / Credit the treasury (cash out every time).	Debit the expense / Credit prepaid expenses (no cash).
Suitable for	Expenses actually paid every period (monthly rent paid every month).	Monthly recognition of an amount paid in advance.

Using a recurring expense for prepaid expenses records cash going out of the treasury every month even though the amount was paid once, so the treasury balance becomes wrong.

FAQs

Where does the remaining prepaid expenses balance appear?

In the chart of accounts, the trial balance and the balance sheet, under current assets. It decreases every month until it reaches zero.

Can the same method be applied to deferred revenue?

Yes, in reverse: record the collected amount in a Deferred Revenue account under liabilities, then a monthly recurring journal entry: debit deferred revenue / credit revenue.

Do I get notifications when recurring journal entries are created?

No. The journal entries are created automatically; review them from the recurring profile or the journal entries list.

I made a mistake in the amount after creating the recurrence. What do I do?

Edit the main journal entry and the entries already created, or delete the recurring profile and the wrong entries and create it again.