Deferred expenses are initially recorded as assets and when they are later used,expenses will increase and assets will decrease.

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Deferred expenses, also called prepaid expenses, are initially recorded as assets on a company's balance sheet because they represent future benefits that the company has paid for in advance. When the benefits are received, the deferred expenses are gradually recognized as expenses, which results in a decrease in assets and an increase in expenses.

Deferred Expenses Are Initially Recorded as Assets and When They