For annual expenses such as liability insurance can it be divided by 12 and then expensed monthly?

ANSWER

Expert Michael Lim's Answer:

If you are using the cash basis of accounting, then you should take the expense in the period when actually paid.

However, if you are using the accrual basis of accounting, and presenting them using Generally Accepted Accounting Principals (GAAP), then you would take the yearly amount and take it ratably over the year.  This would more accurately match the expenses with the period in which they relate to.

Michael Lim, CPA

California

16 yrs experience

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128 Ans.