NaqoodHow to record prepaid expenses in Naqood
A prepaid expense is a cost you pay now for something your business will use later, such as annual rent, insurance, a trade licence, or a multi-year visa. For the full definition, examples, and UAE VAT / Corporate Tax context, see Prepaid Expenses.
This guide shows how to record those costs in Naqood so the cash hits today, but the expense is spread across the months that actually benefit.
When should you mark a purchase as prepaid in Naqood?
Use the multi-period option when the purchase covers more than the current month. Common UAE examples:
| Cost | Typical cover period | Why it is prepaid |
|---|---|---|
| Trade licence | 12, 24, or 36 months | Fee paid upfront for the full licence term |
| Employee or owner visa | Often 24 months | Validity spans more than one accounting period |
| Insurance or software | 12 months (or the subscription term) | Paid once, used across the year |
Office rent paid quarterly or annually is another common case. If the benefit is only in this month, record a normal purchase instead.
For a trade-licence-only walkthrough (including shareholder / Debt to Owner payment), see Add a Trade License purchase.
How to record a prepaid expense in Naqood
1) Open Purchases
Go to Expenses → Purchases → Add Purchase.
2) Upload the receipt or invoice
Upload the supplier receipt or invoice and press Extract.
If this is a new supplier, add them so later purchases stay linked.
On the free tier, fill in amount, description, and the expense account yourself when Extract is not available.
3) Choose purchase type
Pick:
- Cash if you have already paid
- Credit if you still need to pay the supplier
4) Choose how it was paid
Select the payment source:
- Bank for a company bank payment
- Cash for petty cash
- Other when the owner paid personally (use 6850 - Debt to Owner when that applies)
5) Say the purchase covers multiple periods
When asked Does this purchase cover multiple periods?, select Yes and choose the duration that matches the invoice or contract (for example 12 months for an annual trade licence, or 24 months for a typical visa).
Naqood will then:
- Create the prepaid expense asset
- Post the expense monthly over that period
You do not need a separate manual journal each month for the release.
6) Select the expense account
Use a suggested account, or pick the account that matches the cost (for example 3620 - Trade License incl. fees for a trade licence line).
If one invoice mixes prepaid and non-prepaid lines (licence plus PRO fees), split with Add line so each line gets the right account and only the prepaid portion uses the multi-period cover.
7) Press Create
After you create the purchase, the prepaid balance and monthly expense postings are handled in Naqood. You can follow the monthly cost in the dashboard and the Profit & Loss report.
What happens automatically after you create it?
Naqood keeps the unused portion as a prepaid asset and recognises the monthly share as expense. That matches accrual bookkeeping: cash timing and expense timing stay separate.
That matters for UAE management accounts and for Corporate Tax work that starts from accounting profit. Spreading a 12-month licence or 24-month visa avoids dumping the full cash outlay into one month’s P&L.
VAT is separate from the prepaid schedule. If the supplier charged VAT and you have a valid tax invoice, input VAT follows the normal VAT rules and return timing. The prepaid asset usually tracks the net cost over the cover period. Keep the invoice and contract with the purchase record.
Tips for clean prepaid purchases
Match the cover period to the document. A 12-month licence should not be set to 24 months, or monthly expense will be wrong.
Split mixed invoices. Trade licence fees and PRO / consultant fees often sit on one bill. Put the licence on its own line with the prepaid cover period, and the service fee on another line with the right expense account.
Check company VAT settings when you are VAT registered (company details, VAT registered flag, and VAT registration date) so Extract and VAT fields behave correctly. Some items (for example many trade licence fees) may have no VAT, while related service fees might.
Frequently asked questions about prepaid expenses in Naqood
Do I still need monthly journal entries for prepaid expenses?
No. When you mark the purchase as covering multiple periods and choose the duration, Naqood creates the prepaid expense and posts the monthly expense for you.
Can I use this for visas and insurance, not only trade licences?
Yes. Any purchase that covers more than the current month can use the multi-period option: visas, insurance, software subscriptions, and prepaid rent are typical UAE cases. Use the duration that matches the contract or validity period.
Where do I see the monthly expense after I create the purchase?
Check the dashboard and your Profit & Loss report. The monthly portion should appear as expense over the cover period, while the unused balance stays as a prepaid asset until it is released.
What if the owner paid the supplier from a personal account?
Choose Other as the payment source and use 6850 - Debt to Owner when the company owes the owner for that payment. The prepaid cover period still applies the same way.
Where can I read what prepaid expenses mean in accounting?
See the dictionary term Prepaid Expenses for meaning, examples, assets vs expenses, and UAE VAT / Corporate Tax notes.