I am preparing the quarterly financial statements for a small retail business based in Las Pias, Metro Manila, following Philippine Financial Reporting Standards (PFRS) for Small and Medium-sized Entities (SMEs). The company paid 120,000 in advance for a one-year office rental on January 1, 2026, and 24,000 for a six-month insurance policy on February 1, 2026.
I need clear guidance on:
– The initial journal entry to record each prepaid expense when payment is made
– How to calculate the monthly amortization amount for each item
– The adjusting journal entries required at the end of March 2026 (the end of the quarter)
– Where prepaid expenses are presented on the statement of financial position and how the amortized amounts are reflected in the statement of comprehensive income
– Whether there are any specific disclosure requirements for prepaid expenses under local regulations
I also want to confirm if the treatment differs for VAT-registered businesses, as this company is VAT-registered and the payments include 12% VAT.
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