Our business made a deposit on booth space for an event. That deposit was recorded as a Prepaid Expense and currently shows on the Balance Sheet under Current Assets. We are closing our business and will not be able to get the deposit back, so that should no longer be an asset. What is the proper way to move forward with this prepaid expense?
I would use whatever expense account you would have booked the booth rental to if the event had happened - marketing, or ?? It’s a legitimate business expense so whatever makes the most sense to you.
Make a journal entry: debit the appropriate expense account, credit Prepaid Expense. That will close out the Prepaid Expense account and book the forfeited deposit as an expense.
Thank you. That's what I knew I had to do, I just don't know which expense account to debit. What kind of expense account can I use for not collecting money owed?
I would use whatever expense account you would have booked the booth rental to if the event had happened - marketing, or ?? It’s a legitimate business expense so whatever makes the most sense to you.
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