Insurance is a good example of one of many prepaids. Due to the nature of insurance, this expense is paid in advance. If a company spends $12,000 on a one-year insurance policy, its accounting or finance team would book a journal entry to expense $1,000 per month until the prepaid amount is fully amortized or equal to zero.
Additional examples of prepaids include property taxes, rent and licenses. Companies often struggle with monitoring these expenditures and making sure they are correctly recognized over the applicable periods—especially for retailers, since they may have many prepaid rent accounts to manage. Many companies use spreadsheets to setup each expense and the appropriate amortization. This can be a nightmare to administer and ensure there aren’t any mistakes in the spreadsheet.
BlackLine’s Account Reconciliations module has a prepaid amortization template. It can store payments for amortizable items and establish a monthly schedule of the expenses that should be entered over the life of the prepaids. The application then automatically amortizes over future periods, eliminating the need to manage countless spreadsheets and saving accountants’ valuable time each month. The template also contains an automatically populated roll forward schedule.
Learn more about BlackLine’s Account Reconciliations module and how it can help you handle all of your prepaid amortization reconciliations.