This Prepaid Expenses Policy is designed to help organizations strengthen their financial controls by providing a clear framework for managing prepaid expenses. It enables you to establish robust procedures that ensure compliance with regulations and promote efficiency in operations. By leveraging this tool, you can safeguard resources and maintain accurate records, ultimately supporting effective decision making and long-term financial health.

This policy includes two samples, each tailored to strengthen financial controls. Sample 1 details the step-by-step process for identifying and recording prepaid expenses, including roles, responsibilities and practical examples such as prepaid insurance. Sample 2 expands on classification, amortization and managerial responsibilities, ensuring that prepaid expenses are properly recognized and systematically allocated over time. Each sample is crafted to guide organizations in implementing best practices for prepaid expense management.

Sample procedures include:

• Prepaid expense amounts will be properly recorded in a subledger.
• The accounting manager will review schedules of existing prepaid expense amounts for any changes that may alter the amortization.
• A prepaid expense is a cost incurred to acquire an economically useful good or service that has not yet been consumed in the revenue-earning process.
• Prepaid expenses will be classified as current assets and will be charged to future operations on the basis of measurable benefits or on a time-charge basis.