Prepaid expenses are
A) paid and recorded in an asset account before they are used or consumed.
B) paid and recorded in an asset account after they are used or consumed.
C) incurred but not yet paid or recorded.
D) incurred and already paid or recorded.

Question

Quizplus · Accepted Answer

Prepaid expenses are expenses that are paid in advance, meaning they are recorded in an asset account before they are used or consumed. Examples of prepaid expenses include insurance premiums, rent payments, and subscription fees. By recording these expenses as assets, a company can spread the expense over the period in which they will benefit from the payment. Once the prepaid expense is consumed or used up, it is then transferred to an expense account.

Prepaid Expenses Are