Prepayments
Prepayments are payments made in advance for goods or services that will be received in the future. In bookkeeping, these need to be carefully tracked because they represent money spent now for something that hasn't happened yet. Think of it like paying rent at the start of the month - you're paying before using the space. Bookkeepers need to record these properly to make sure company financial statements are accurate. This is sometimes called 'prepaid expenses' or 'advance payments' and is a common concept in accounting roles.
Examples in Resumes
Managed Prepayments and Prepaid Expenses tracking system for 200+ vendor accounts
Implemented new procedures for handling Prepayments resulting in 30% faster month-end closing
Reconciled Prepaid accounts and created monthly amortization schedules
Typical job title: "Bookkeepers"
Also try searching for:
Where to Find Bookkeepers
Professional Organizations
Job Boards
Learning Resources
Example Interview Questions
Senior Level Questions
Q: How would you handle prepayments for a company with multiple international subsidiaries?
Expected Answer: A senior bookkeeper should explain the process of tracking prepayments across different currencies, mention the importance of exchange rate considerations, and discuss how to maintain consistent recording practices across multiple entities.
Q: What systems would you put in place to ensure prepayments are properly amortized and recorded?
Expected Answer: Should discuss creating a tracking system, regular review procedures, automated reminders for amortization entries, and methods to reconcile prepayment accounts regularly.
Mid Level Questions
Q: How do you handle prepayment reconciliation at month-end?
Expected Answer: Should explain the process of reviewing prepaid accounts, creating amortization schedules, and ensuring proper monthly journal entries are made to reflect the used portion of prepayments.
Q: What's the difference between a prepayment and a deposit?
Expected Answer: Should be able to explain that prepayments are for specific future goods/services with a known schedule, while deposits are often refundable and may not have a specific schedule for using the service.
Junior Level Questions
Q: What is a prepayment and why is it important to track it?
Expected Answer: Should explain that prepayments are payments made in advance for future goods/services, and they need tracking to ensure expenses are recorded in the correct accounting period.
Q: How do you record a basic prepayment in the accounting system?
Expected Answer: Should be able to explain the basic double-entry for recording a prepayment (debit prepaid expense, credit cash) and how to record the monthly usage.
Experience Level Indicators
Junior (0-2 years)
- Basic prepayment recording
- Monthly amortization entries
- Use of accounting software
- Basic reconciliation skills
Mid (2-5 years)
- Complex prepayment schedules
- Month-end closing procedures
- Account analysis and reconciliation
- Financial report preparation
Senior (5+ years)
- Advanced prepayment tracking systems
- Team training and supervision
- Process improvement
- Complex reconciliations
Red Flags to Watch For
- Unable to explain basic prepayment concepts
- No experience with accounting software
- Poor attention to detail
- Lack of understanding about month-end procedures
Related Terms
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