At the time of Payment: Prepaid Expense A/c               Dr To Cash/Bank A/c At the time of year-end adjustment: Expense A/c                            Dr To Prepaid Expense     Let us understand with an example: ABC Company paid Office Rentals worth AED 60,000/- for the period 1st April, 2016 to 31st March, 2017 on 7th April, 2016.   For the Financial Year ending 31st December, 2016, office is going to be occupied for 9 Months and the rental for that period comes to (60,000*9/12) = AED 45,000/- Hence the total excess amount paid comes to AED 15,000/- (60,000-45,000). This excess amount is called prepaid expense. So, the accounting entries will be as follows:  At the time of Payment: Prepaid Rent A/c                     Dr                    60,000 To Bank A/c                                                                               60,000   At the time of year-end adjustment: Rent A/c                                  Dr                    45,000 To Prepaid Rent A/c                                                                        45,000  ]]>