Finance

Prepayments

Money paid up front, still owed to you in value.

A prepayment is money that has left your account but not yet been consumed: rent paid for the months ahead, a service settled in advance, a deposit sitting with a supplier. Tracking it stops the balance looking like it is simply spent, because the value is still owed to you. Prepaid balances draw down as the period they cover elapses.

Key Features

  • Amounts paid in advance held as a balance
  • Drawn down over the period they cover
  • Counted as value still owed to you
  • Kept apart from ordinary expenses

Use Cases

  • Rent or school fees paid several months ahead
  • A deposit held by a supplier
  • An annual service paid for in one go

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