Accounting · Free tool
Prepaid Expense Amortization Calculator
An annual insurance premium, a software license, or rent paid in advance is recorded as a prepaid asset and expensed month by month. This calculator spreads the prepaid amount across its term and tells you how much has been recognized after a given number of months and how much remains. It is designed for bookkeepers and controllers at month-end close.
- OutputRecognized and remaining
- No sign-up
- Copy or print the result
- How it works ↓
Your entries stay in this browser. Use Fill example to see a finished page first.
What this accounting tool gives you
The result gives three figures: the monthly amount, the amount recognized to date, and the remaining balance. The monthly figure is your recurring journal entry, and the remaining balance is what the prepaid account should show on the balance sheet, which makes it a quick reconciliation check.
What you enter
- Currency: USD by default, or EUR or GBP (only changes how amounts are formatted)
- Prepaid amount: the total paid in advance, zero or more
- Months in the term: how many months the payment covers, at least 1
- Months elapsed: how many months of the term have passed, no more than the term
Worked example
The tool's example is a $2,400 prepayment covering 12 months, with 5 months elapsed. The monthly amount is $2,400 ÷ 12 = $200. After five months, $200 × 5 = $1,000 has been recognized as expense, and $1,400 remains in the prepaid account on the balance sheet.
How is a prepaid expense amortized?
Monthly amount = prepaid amount ÷ months in the term. Recognized to date = monthly amount × months elapsed. Remaining = prepaid amount − recognized. Each figure is rounded to the cent.
Months elapsed cannot be greater than the term. The schedule is even across months, so it does not prorate by days. Because the monthly amount is rounded first, the last month may need a cent or two of adjustment in your books when the amount does not divide evenly.
Tips before you use the result
- Tie the Remaining figure to your prepaid balance at month end; a difference points to a missed or doubled amortization entry.
- Count months elapsed through the close month, including the current one if you have booked its expense.
- If the service starts mid-month, decide how you treat the first month and apply the same rule to every prepaid item.
- For amounts that do not divide evenly, book the rounding difference in the final month so the prepaid account clears to zero.
Frequently asked questions
How do you calculate prepaid expense amortization?
Divide the prepaid amount by the number of months it covers to get the monthly expense. Multiply that by the months that have passed to get the amount recognized so far, and subtract it from the original amount to get the remaining balance. For $2,400 over 12 months, after 5 months, $1,000 is recognized and $1,400 remains.
What is the journal entry for a prepaid expense each month?
Typically you debit the related expense account, such as insurance or software, and credit the prepaid asset for the monthly amount. This calculator gives you that amount, $200 in the example, but it does not post entries. Confirm your account names and policy with your chart of accounts.
Why does the remaining balance not reach exactly zero?
It will when the amount divides evenly by the term. When it does not, the monthly amount is rounded to the cent, so the recognized total can be off by a few cents at the end. Adjust the final month's entry by that difference to clear the prepaid account.
Is there an account or login for this calculator?
There is none. The prepaid amount, term, and elapsed months are saved to local storage in the browser you use, so you can come back to the same schedule during close. Clearing the form or your browser data removes them.
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Results depend on the figures you enter; check them against your own records before you rely on them. Last updated: October 2026 · Kurums editorial team.