Let me share some information so you'd be able to track your prepaid expenses.
First, you'd want to create an account to track your prepaid expense. Here's how:
Go to the Accounting menu.
Select the Chart of Accounts tab.
Click the New button.
Choose the Account Type and Detail Type.
Enter Prepaid Expense as its name.
Click Save and Close.
Once completed, record payments to the outstanding bill. Just make sure to use the prepaid expense in paying the bill.
The next process is to create a memorized expense or bill transaction to allocate one month or a quarter of the expense. Each time an entry is created, it reduces the balance of the Prepaid expense account. The balance in the Prepaid Expenses account should be zero at the end of the coverage period.
Lastly, I'd recommend consulting your accountant. This way, you'd be guided accurately in setting up your prepaid expense account.
Leave your comments below if you have other questions about tracking your expense transactions. I'm just a few clicks away.
How do you allocate prepaid expense to outstanding bill?
I created the prepaid insurance and it has $800 balance. I need to pay the Jan bill for $400. I pull up the bill I created, go to payment and chose Prepaid Expense as Bank/Credit Account and it says that I can't use that account type and will not let me pay the bill with it.
I recommend visiting this write-up: Account Management. These will provide your links about managing your QuickBooks Online account, income, expenses, inventory, and running reports.
Kindly update me on how things go by adding another comment below. I want to make sure you're able to pay your January bill using the Prepaid Expense account, and I'm here if you need further guidance. Have a great day! All the best.