In October you pay for insurance covering twelve months. Three months concern the year that is ending, nine concern the next one. A prepaid expense takes out of the result the portion already paid but not yet consumed, and carries it to the year it genuinely belongs to. It is the “invoiced in advance” side of cut-off.
The essentials in five points
- The test is the period covered, not the payment date and not the invoice date.
- Only the unconsumed portion is restated, calculated pro rata to the time remaining.
- The restated amount excludes VAT. VAT was already deducted on its own date and is not affected.
- The counterpart is an asset account — prepaid expenses (3491) — not a cost account.
- The entry is reversed at opening, which puts the cost back into the year that bears it.
1. Identifying the costs to restate
Not every cost is concerned. Only those covering an identifiable period that runs past the closing date are, which keeps the list down to a few well-known families.
| Type of cost | Concerned? | Basis for the split |
|---|---|---|
| Annual or half-yearly insurance | Yes | Coverage period in the policy |
| Rent paid in advance | Yes | Months covered by the payment |
| Software or service subscription | Yes | Length of the subscription |
| Maintenance contract | Yes | Warranty or service period |
| Purchase of goods for resale | No | Handled in stock, not as a prepayment |
| Consumed supplies | No | Consumed within the year |
The distinction from stock matters: goods paid for and not sold are not a prepaid expense, they stay in stock. A prepaid expense is about time, not about physical goods.
2. Calculating the apportionment
The calculation is a simple proportion applied to a duration. It can be done in days or in months, provided you stay consistent from one year to the next.
- Take the amount of the cost excluding VAT.
- Identify exactly the period covered, start and end.
- Count the portion of that period falling after the closing date.
- Apply that fraction to the amount excluding VAT.
- Round to the dirham and note the calculation next to the entry.
- Keep the contract, which is the document proving the period.
Example: insurance of 12,000 dirhams excluding VAT covering 1 October to 30 September, with the year closing on 31 December. Three months are consumed, nine remain. The prepaid expense is 9,000 dirhams, and the closed year bears only 3,000 dirhams.
3. Posting the entry, without touching VAT
The entry reduces the closed year’s cost and creates an asset, since the business has paid for a service it has not yet received.
- The cost account: It is reduced by the unconsumed portion. The closed year’s result rises by the same amount.
- The prepaid expenses account: It is debited for the same amount. In the Moroccan chart, this is account 3491, under current assets.
- VAT: It is not touched. It was deducted on the date the right to deduct arose, and the accounting split does not change that.
- The supporting document: The contract and the pro-rata calculation, stapled together. That is what makes the entry checkable a year later.
This is the most common error on the topic: assuming that an accounting restatement carries a VAT restatement with it. The two logics are entirely independent.
Do not restate VAT along with the cost
A prepaid expense is calculated on the amount excluding VAT, and the VAT stays deducted exactly as it was. The right to deduct arises on its own date, independently of how the cost is spread across time in the accounts. Recalculating VAT pro rata creates a gap between the accounts and the returns, and that gap surfaces at the first reconciliation.
4. Reverse and check
Like every adjusting entry, this one is provisional and must be taken back, otherwise the cost simply disappears from the accounts altogether.
- At the opening of the following year, reverse the entry.
- The cost then returns to the year it genuinely concerns.
- Check that account 3491 has cleared after the reversal.
- Redo the list at the next close: contracts get renewed.
- Compare one year with the next: the amounts should be of the same order.
A large swing from one year to the next with no change in contracts usually signals a cost forgotten in one of the two years. It is a good consistency check, quick and effective.
Mistakes to avoid
- Calculating the apportionment on a VAT-inclusive amount.
- Treating unsold goods as a prepaid expense instead of stock.
- Restating VAT along with the cost.
- Forgetting to reverse at opening, and losing the cost entirely.
- Splitting in months one year and in days the next, with no consistency.
- Not keeping the contract that proves the period used.
Frequently asked questions
Which costs are concerned?
Those covering an identifiable period running past the closing date: insurance, rent paid in advance, subscriptions, maintenance contracts. A cost consumed within the year is never concerned.
Should the calculation be in days or in months?
Both are acceptable. Months are enough in most cases; days are preferable for large amounts or periods that do not start at the beginning of a month. What matters is keeping the same method from year to year.
Should VAT be apportioned?
No. The restatement applies to the amount excluding VAT. VAT was deducted on the date the right to deduct arose and is not changed by how the cost is split in the accounts.
What is the difference from an accrued expense?
They are opposites. A prepaid expense was paid or invoiced too early and must come out of the year; an accrued expense concerns the year but has not yet been invoiced and must go into it.
Does BelloPOS calculate prepaid expenses?
No, and it does not claim to. This restatement requires reading the period covered by a contract, information that does not appear in a payment record. BelloPOS supplies the recorded expenses and their documents; the apportionment is calculated with your accountant.
What to take away
The prepaid expense is the most mechanical restatement of the whole close: a period, a proportion, an entry, a reversal. The only real trap is VAT, which must be left alone. Draw up the list of contracts once and it will serve you every year afterwards.
Sources
The figures and rules quoted above come from these pages, read on the date given in the article.
- Ministry of Economy and Finance, General Code of Accounting Standardisation, read 1 September 2026
- Moroccan Tax Administration, 2026 General Tax Code
Your expenses, with their documents
BelloPOS keeps recorded expenses and their supporting documents, the raw material for this restatement. Purchases start with Go, accounting and exports with Pro.
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