What Are Postpaid Expenses

The word Prepaid means to pay after receiving some benefits. So, Postpaid Expenses are those Expenses for which the Sole Proprietor’s Business or the company enjoyed the benefits but the payment is payable at the end of the accounting period. It is a Current Liability for the business and shown on Balance Sheet as it is payable at the end of the accounting period for which the business has already received the benefits for that period. For Example, if the user company after receiving internet usage data and then pay to internet service company at the end of the accounting, then it is an example of postpaid expenses.

Postpaid Expenses Journal Entry is the same as in case of Accrued Expenses or Outstanding Expenses or Expenses Payable.

When the company incurs the expenses, then the following Adjusting Entry is recorded as shown below:

                                                       Expenses a/c   XXX

                                                                           Postpaid Expenses a/c   XXX

                                                    (Expenses Postpaid for the Month)

At the end of the accounting period, when the company actually paid against the services received, then above adjusting entry is reversed by passing Reversing Entry.

The entry to record for cash payment is shown below:

                                                           Expenses a/c   XXX

                                                                                Cash a/c   XXX

                                                                (Paid Expenses for the Month)