Prepaid Assets Reconciliation
This template reconciles prepaid assets and calculates the M-1 adjustment for any book/tax difference. The full amount of certain prepaid expenses can be deducted in the year of payment by cash basis taxpayers. Deductions for others (prepaid interest and rent, for example) must be prorated over the period of use of the asset or the time of performance of the services purchased. A blank journal entry is provided for any reconciling entries needed.
Entering Information
All of the information needed to produce the calculations is entered on the Input worksheet. The yellow highlighted cells are calculated fields, and no data should be entered in these cells. Gray cells are not calculated fields, but data should not be entered in these cells.
Enter the following information:
- Description of prepaid asset
- Total amount of current year amortization for book purposes
- Category [Enter the prepaid asset category. For example, for prepaid insurance, enter the type of insurance (casualty, auto, workman’s compensation, and so forth.]
- Payee
- Any beginning balances of prepaid assets (prior year prepaid assets)
- Number of months remaining for beginning balances
- Month of payment for current year payments (Enter the numeric value e.g. December is entered as 12.)
- Total amount (Enter the total contracted amount.)
- Down payment (Enter any down payment made.)
- Number of months the payment covers
- Number of months of coverage in current tax year (This calculation is automatic for calendar year corporations. Override this number for fiscal year entities.)