Prepaid Expenses and Deferred Charges

1. Proper authorization to incur

Means a company specifically in accounting department needs proper authorization that

will incur through giving authority to do something important of one of the accounting process
for any accounting transactions that needs approval of someone* who has in* position. Example
to complete process of accounting transaction there are various stages that were delegated.
These stages include the processes of Recording (initiate, submit, process), Approving (pre-
approval, post entry review), and Reconciling. Which each stages needs approval from those
assigned staff that needs their proper approval thru signing their reports and submit it to the next
process until it finish the tasks needed for the preparation of financial reports or statement
needed by the users.

Authorization to incur is the authority to complete the various stages of a transaction is

delegated. These stages include the processes of Recording (initiate, submit, process), Approving
(pre-approval, post entry review), and Reconciling. The example for this is
2. Authorization and support of amortization
Prepaid expense amortization is the method of accounting for the consumption of a
prepaid expense over time. This allocation is represented as a prepayment in a current account on
the balance sheet of the company.
3. Detailed records
All the documents that one uses to prepare all the financial statements and one may use to
defend against an audit. Accounting records include ledgers, receipts, sales records. When there
is a payment that represents a prepayment of an expense, a prepaid account, such as Prepaid
Insurance, is debited and the cash account is credited. This records the prepayment as an asset on
the company’s balance sheet. An amortization schedule that corresponds to the actual incurring
of the prepaid expenses or the consumption schedule for the prepaid asset is also established.
4. Periodic review of amortization policy
With amortization, the amount of a common accrual, such as prepaid rent, is gradually
reduced to zero, following what is known as an amortization schedule. The expense is then
transferred to the profit and loss statement for the period during which the company uses up the
accrual.
5. Control over insurance policies
Insurance policies are used to hedge against the risk of financial losses, both big and
small, that may result from damage to the insured or her property, or from liability for damage or
injury caused to a third party.
6. Periodic review of insurance needs
It is important to review an insurance policy on a periodic basis. Insurance policies are to
create a one-page policy summary for each policy. Most insurance policies contain a page in
front of the insurance contract that is called a " declarations page" or "policy summary." It will
contain most of the information you will want to review. Either way, start by reviewing the
basics like Type of Policy, Insurance Carrier, Policy Number, Date Issued, Premium Required,
Insured, Beneficiary. 
7. Control over premium refunds
A premium refund is a clause in an insurance policy that grants the beneficiaries a refund
on the policy's face value, as well as the total amount of premiums paid. This type of refund is
not limited to life insurance but is given for different policies, including health insurance and
primate mortgage insurance.
8. Beneficiaries of company policies
The company is required to offers its employees a pension plan, free health insurance,
and other benefits. Offering benefits to your employees is important because it shows them you
are invested in not only their overall health, but their future. 
9. Physical control of policies
Physical control over assets and records helps protect the company's assets. These control
activities may include electronic or mechanical controls (such as a safe, employee ID cards,
fences, cash registers, fireproof files, and locks) or computer-related controls dealing with access
privileges or established backup and recovery procedures.

Intangibles Controls
1. Authorization to incur
The term “intangible assets” often triggers thoughts of intellectual property, such as
patents or copyrights. But licenses and permits that allow a company to do business also fall into
this category and can carry significant value. Licenses and permits may be subject to valuation
when they, or the business that owns them, are for sale or the subject of litigation. A valuation
might also be necessary for estate planning and tax purposes.
2. Detailed records

Intangibles are recorded at their acquisition cost, as are tangible assets. The costs of
internally generated intangible assets, such as a patent developed through research and
development, are recorded as expenses when incurred. An exception is legal costs to register or
defend an intangible asset. For example, if a company incurs legal costs to defend a patent it has
developed internally, the costs associated with developing the patent are recorded as an expense,
but the legal costs associated with defending the patent would be capitalized as a patent
intangible asset.
3. Authorization to amortize
To amortize is the process of writing off the book value of an asset over its useful life.
The term is most commonly applied to intangible assets. Depreciation is used to write off
tangible assets. Amortization is usually conducted on a straight-line basis, with no acceleration
of the write-off in the earlier periods of an asset’s useful life.
4. Periodic review of amortization
Amortization of intangible assets is handled differently than depreciation of tangible
assets. Intangible assets are typically amortized using the straight-line method; there is typically
no salvage value, as the usefulness of the asset is used up over its lifetime, and no accumulated
amortization account is needed. Additionally, based on regulations, certain intangible assets are
restricted and given limited life spans, while others are infinite in their economic life and not
amortized.
 Fixed Assets Controls
10. Physical safeguard from theft
- Meaning of Fixed Asset should be safeguarded thru giving protection. A best example, a
building is a Fixed Asset that needs to be physically safeguarded by installing an expert people in
protecting the building like hiring a guard is one of the controls needed to provide.
11. Control over fully depreciated assets
- A fixed asset is fully depreciated when its original recorded cost, less any salvage value,
matches its total accumulated depreciation. A fixed asset can also be fully depreciated if an
impairment charge is recorded against the original recorded cost, leaving no more than the
salvage value of the asset. Thus, full depreciation can occur over time, or all at once through an
impairment charge.
12. Written capitalization–expense policies
- A capitalization policy is used by a company to set a threshold, above which qualifying
expenditures are recorded as fixed assets, and below which they are charged to expense as
incurred. The policy is typically set by senior management or even the board of directors.