Prepaid Expense

A prepaid expense is a payment made in advance for goods or services to be received in the future. It is recorded as an asset on the balance sheet until the expense is recognized.

Examples include prepaid insurance and rent. Over time, the prepaid amount is expensed on the income statement.

Related Terms

Accrual Basis

Accrual basis accounting recognizes revenue when it is earned and expenses when they are incurred, r...

Balance Sheet

A balance sheet is a financial statement that reports a company's assets, liabilities, and sharehold...

Income Statement

An income statement is a financial statement that summarizes revenue, expenses, and profit over a sp...

Deferred Revenue

Deferred revenue is money received for goods or services that have not yet been delivered. It is rec...

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