Glossary and Terminology

Prepaid Expense

A prepaid expense occurs when payment is made in one fiscal year (before May 31) for expenses that are not incurred until a subsequent fiscal year (after May 31).

1. Payment is made in March for registration & airfare for a conference that is scheduled in July

2. Two years of subscription service is purchased and paid for in advance

1. If you have minor annual license, membership, or subscription that is paid for only one year at a time and renews every subsequent year, it does not have to be recognized as a prepaid expense, even if the renewal term falls within two fiscal years (i.e. January to December).

2. An expense is only considered prepaid if the payment is made in full, in advance of the new fiscal year. If receiving pro-rated invoices annually, monthly, or as work is completed, do not code as prepaid. 

3. If at any point you are uncertain of whether an expense should be coded as a prepaid, please email us at

1. If the time-period of expenses spans the current fiscal year and the future fiscal year(s), perform a calculation to break down the charges.  

2. Code the relevant portion of the future fiscal year(s) cost to account code 1-10702-00000-99999 and split the current term cost to the current fiscal year 16-digit account code, if necessary.

3. Be sure all relevant documents are attached to support the determination of the prepaid accounting and how any necessary calculations were made.

1. Credit Card purchase – Use the ‘Expense Description’ field to input the future 16-digit account code and abbreviated information for the business reason, dates of travel (if applicable), and any other relevant information. If traveling to a foreign country, be sure to input the ‘Foreign Country Name’ under ‘Expense Type’ information.

2. E-Market purchase – Use the ‘AP Internal Note’ field to provide the future 16-digit account code and provide an explanation for any necessary breakdown of charges.

3. Payment Request (Non-E-Market) –Use the ‘Business Purpose Description’ section to provide the future 16-digit account code, as well as the details of the expense.

Contact us at for assistance with prepaid expenses. Thank you!