Prepaid / Payable Advertising in QB

Re: Prepaid / Payable Advertising in QB

kimj6 wrote:

I am new to this forum and this is my first post. I hope this community proves to be the excellent resource its seems to be for small businesses, as I have just started one of my own.

My company has just signed several advertising contracts which I am trying to log into Quickbooks. I am new to the program as I have just started the company, and I am having trouble logging the accounts properly. I know what needs to happen accounting wise, but I'm not sure how to achieve it in Quickbooks....at least I'm not doing it properly.

One ad contract is for 3 months, but we paid the entire balance up front, a month in advance of the ad campaign actually starting. How do I enter the amount so that $1,137 shows up as a Prepaid Asset as well as a payment from our Checking Account, yet Expense $379 each month for the next 3 months.

The other contract is the opposite of this. We entered into a year long $4,045 contract to be paid monthly, but only paid the first month plus sign up fee of $360. $335 will be paid each other month. When I enter the transaction, my Income Statement shows the entire $4,045 expensed in the first month.
Thank you so much in advance,

If I'm remembering correctly what I was taught at the University, here's what you do.

When you prepay for an asset, in this case advertising, you will:

Debit: Prepaid Advertising 1137.00
Credit: Bank Account 1137.00

To record the expiration of Advertising at the end of each month as an adjusting entry:

Debit: Advertising Expense 379.00
Credit: Prepaid Advertising 379.00

For your second scenario:

Debit: Prepaid Advertising 3350.00
Debit: Advertising Expense **5.00
Credit: Bank Account 4045.00

To record the expiration of Advertising at the end of each month as an adjusting entry:

Debit: Advertising Expense 335.00
Credit: Prepaid Advertising 335.00

Now, it's been a while since I did this but I'm 95% sure that it's the correct answer. In other words, this is my final answer. Phoning a friend would be very difficult right now. I'm sure others will like to share their solutions. Very Happy

Re: Prepaid / Payable Advertising in QB

kim09 wrote:

When you prepay for an asset, in this case advertising, you will:

Debit: Prepaid Advertising 1137.00
Credit: Bank Account 1137.00

To record the expiration of Advertising at the end of each month as an adjusting entry:

Debit: Advertising Expense 379.00
Credit: Prepaid Advertising 379.00

I agree with the first part of your solution, but I think the second part is just a matter of expensing it as paid.

kimj6 wrote:

The other contract is the opposite of this. We entered into a year long $4,045 contract to be paid monthly, but only paid the first month plus sign up fee of $360. $335 will be paid each other month. When I enter the transaction, my Income Statement shows the entire $4,045 expensed in the first month.

If I understand the OP's original question, the second contract is not prepaid.

First payment:
$**5.00 - Advertising Expense
$**5.00 - Cash/Checking

2nd thru 12th payments:
$335.00 - Advertising Expense
$335.00 - Cash/Checking

Be forewarned, I'm tired and might be misconstruing this entirely.

bela

Re: Prepaid / Payable Advertising in QB

hello.

It could be confusing to someone not familiar with accounting. Here it is again this time with better wording:

For the $1,137, debit Prepaid advertising {a current asset} at the Write Checks screen, the credit will automatically be posted to checking.

For the $379 amount to write-off monthly, there is no check to write, only an adjusting entry to make monthly to write it off. Use the General Journal Entry window for this. Choose Banking | Make General Journal Entries. Click in the Account column and then click the arrow to see a drop-down list of the chart of accounts. You want to debit your Advertising expense account set up for this and credit Prepaid advertising [current asset]. I apologize, I stated not to use journal entries for any of the transactions, but this is the one transaction you will have to make by journal entry.