Prepaid expenses in the balance sheet are intended to summarize the information about the costs that were incurred during this reporting period, but are coming period.Such a definition is provided in the Regulation on the conduct of the financial statements and how to use the Chart of Accounts.
Accounting deferred expenses is thus the method of distribution of the costs have already been committed.In the category of these costs does not include transactions that are related to the disposal of assets, advances or prepayment as well.
when reporting is necessary to consider the conditions under which the recognized deferred expenses.In particular, the costs are carried out in accordance with certain requirements or regulatory acts, contract, traditions of business turnover.One of the conditions is the ability to determine the amount of costs.Prepaid expenses are recognized as such if there is confidence that the outcome of a particular transaction will reduce the economic benefits of the enterprise.
According to the instructions of the plan of accounts, expenses, in accordance with its economic content, are divided into two categories.The first is the cost of a preparatory nature in future periods.They relate to income that are expected in the future.These costs, in particular, include the costs of development of new technologies for the production, mine development activities, preparation for seasonal work and so on.The second category includes the cost of the current period.In this group, in particular, include the cost of implementing an expensive repair of production equipment.For these costs reflected under the relevant article it is considered to be no more than "smoothing" unevenness using arbitrary distribution of a substantial amount of costs for several periods.
It should be noted that the instructions did not mention the cost lasting or recurrent.These include, for example, the cost of licensing activities, payment of insurance, for the purchase of rights to use the software transferred on a particular date.Not specified in the document and advances on payments for rent.
Prepaid expenses associated with the upcoming income, divided into two groups.The first include costs directly attributable to profit in the future.They, in particular, including the preparatory costs of production needs.The second category includes expenses related to revenue unclear, indirectly.
costs are recognized in the accounting of the profit and loss account, taking into account the link between revenue and production costs (in accordance with the principle of cost-profit).It follows that to spending the coming period should include costs that directly cause profit.This profit can come and go in the future.
In addition, the costs can be reasonably distributed between reporting periods.This is possible provided that the costs cause a profit for several periods or if the relationship between spending and revenue can not be clearly defined or established indirectly.
It follows that the method of accounting for costs associated with the upcoming profit indirectly (indirectly), will depend on the personal opinions of professional accountants.These costs can be shared, but only if there is a compelling rationale for their connection with obtaining future profits.If such a study is not available, the production costs need to be considered as a cost in the current period without distribution.