A prepaid expense is a good or service that has been paid for in advance but not yet incurred. ... Definition, How It Works and Example Calculation. Trimmed Mean: Definition, Example, ...

On December 31, an adjusting entry will show a debit insurance expense for $400—the amount that expired or one-sixth of $2,400—and will credit prepaid insurance for $400.

To accrue funds for a discretionary expense, book a journal entry that debits, or increases, a prepaid discretionary expense. Then book an entry that credits, or decreases, the cash account.