101.3 - Statewide Accounting Policy - Prepaid Items

Policy Area: Accounting and Financial Reporting
Policy Sub Area: Account Classification
Authority:  GASB Codification Section 1600; AICPA Audit and Accounting Guide: State and Local Governments (Chapter 8)
Effective Date: 7/1/1995
Last Revision Date: 1/30/2017
Policy Owner/Division: Statewide Accounting


Prepaid items are payments for services that benefit more than one accounting period, such as insurance, rent, and subscriptions. 
In governmental funds (general, special revenue, capital projects, and permanent), which follow the modified accrual basis of accounting, prepaid items should be accounted for using the purchases method (i.e., considered expenditures when purchased). Balances of prepaid items in governmental funds should not be reported as assets. 



Accounting Guidance

In the government-wide, proprietary fund (enterprise and internal service), and fiduciary fund financial statements, which follow the accrual basis of accounting, prepaid items should be reported as assets and allocated to the period benefited.

Related Documents (Memos/Forms)

Refer to the Chart of Accounts: Prepaid Items 119100

Revision History

  • 3/1/2007 - Changed to the purchases method
  • 1/30/2017 - Update links