Prepaid expenses and deferred revenue must be recognized over the period they benefit. Enter the amount and service dates to produce a month-by-month schedule, the journal entry, and the balance remaining at each month-end.
How it works
Spread a prepaid expense or deferred revenue balance over its service period, by equal months or actual days, with the monthly journal entry.
Actual days: Period amount = Total × Days in period ÷ Total service days
Equal months: Period amount = Total ÷ Number of calendar months touched
Remaining balance = Total − Cumulative recognizedCommon uses
- Insurance, software and maintenance contracts
- Annual subscriptions and customer prepayments
- Month-end close and balance sheet reconciliations
Worked example
The calculator above opens with this example. Change any input to see the results update instantly, or select Reset to return to these figures.
| Balance type | Prepaid expense |
| Total amount | $36,000 |
| Service start date | 2026-07-15 |
| Service end date | 2027-07-14 |
| Allocation method | Actual days (precise proration) |
| First-period amount | $1,676.71 |
| Periods | 13 |
| Service days | 365 |
| Daily rate | $98.63 |
Monthly entry: Dr Expense / Cr Prepaid expense for the amount in each period. Amounts are rounded to cents; the final period absorbs any rounding difference.
Interpreting the results
- The actual-days method best matches expense to the service period when the term starts mid-month.
- Reconcile the remaining balance to the general ledger account at each month-end close.
- Revenue recognition for contracts with multiple performance obligations follows ASC 606 and may require allocation first.
Frequently asked questions
Should I amortize by months or by days?
Daily allocation is the most precise, particularly for service periods that start mid-month, and supports a clean reconciliation. Equal monthly allocation is simpler and is acceptable when the difference is immaterial.
What is the journal entry for a prepaid expense?
Each month, debit the related expense and credit the prepaid asset for the amount consumed. For deferred revenue, debit deferred revenue and credit revenue as the performance obligation is satisfied.
Is there a minimum amount to capitalize as prepaid?
Many companies set a policy threshold and expense smaller prepayments immediately, since the effect is immaterial. Document the threshold in your accounting policy and apply it consistently.
Related calculators
- Depreciation Calculator: Straight-line, double-declining, SYD, units-of-production and MACRS schedules.
- Budget vs. Actual Variance Analyzer: Line-item variances with favorable/unfavorable flags and investigation thresholds.
- Gross Margin & Markup Converter: Convert between cost, price, gross margin and markup.
- Revenue Recognition Scheduler (ASC 606): Allocate the transaction price by standalone selling price and schedule recognition.
- Lease Accounting Calculator (ASC 842): Lease liability, ROU asset and full amortization schedule for operating or finance leases.