Film Accounting Glossary
Prepaid expense
What is a prepaid expense?
Also called prepayment, or prepaid.
A prepaid expense is a cost paid in advance of the period it covers, such as insurance premiums, stage rent, or a location deposit paid months before the shoot.
Prepaids are held as an asset and then charged to cost in the periods they actually relate to, so the cost report reflects the shoot rather than the payment date. Failing to spread them makes an early period look catastrophic and later periods look artificially clean.
Example
A $96,000 annual insurance premium paid in prep for a shoot spanning four months is charged $24,000 a month rather than $96,000 in week one. Otherwise the first cost report looks catastrophic and the later ones look artificially clean.
Figures are illustrative, chosen to show the mechanics rather than to quote market rates.
Where you'll see it
Held as an asset and released to cost across the periods it covers. Common for insurance, stage rent, and location deposits.
Common mistake
Charging a prepayment entirely to the week it was paid. The early report looks catastrophic, the later ones artificially clean, and neither reflects the shoot.
Related questions
- What is a prepaid expense on a production?
- A cost paid in advance of the period it covers, such as insurance premiums, stage rent, or a location deposit paid during prep.
- How are prepaid expenses treated in a cost report?
- Held as an asset and released to cost across the periods they actually relate to, so each week carries its share rather than the payment date carrying all of it.