Prepaid Expenses Amortization Calculator
Generate audit-ready amortization schedules for prepaid assets. Calculates monthly straight-line write-offs with accurate date proration.
About
In accrual accounting, expenses must be recognized in the period they are incurred, not when they are paid. Prepaid expenses-such as annual insurance premiums, software subscriptions, or rent-must be amortized over their useful life. Manual calculation in spreadsheets often leads to date-boundary errors, particularly when the service period does not align with the first day of the month.
This utility automates the straight-line amortization method (Cost ÷ Term). It handles the nuance of partial months by prorating the first and last periods based on the exact number of active days, ensuring the General Ledger (GL) balance reaches exactly zero at the end of the term.
Formulas
The calculator uses the Straight-Line method with Day-Count Proration for the initial and final periods.
1. Daily Rate (Rday):
Total AmountTotal Days in Term2. Monthly Expense (Em):
{Reference Data
| Expense Type | Typical Duration | GL Account (Debit) | GL Account (Credit) |
|---|---|---|---|
| Business Insurance | 12 Months | Insurance Expense | Prepaid Insurance |
| SaaS Subscriptions | 12 / 24 Months | Software Expense | Prepaid Software |
| Office Rent | Lease Term | Rent Expense | Prepaid Rent |
| Marketing Retainer | Contract Term | Marketing Expense | Prepaid Expenses |
| Equipment Warranty | 36 / 60 Months | Warranty Expense | Prepaid Warranty |
| Property Tax | 12 Months | Tax Expense | Prepaid Taxes |
| Consulting Fees | Project Term | Professional Fees | Prepaid Services |
| Trade Show Booth | One-time | Events Expense | Prepaid Events |