Prepaid expenses are expenses that have been paid in advance before they are actually incurred or used. They are initially recorded as assets on the balance sheet because they provide future economic benefits to the company. As they are used or consumed, they are gradually recognized as expenses on the income statement.

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Prepaid Expenses Are

Question 32

Multiple Choice

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.

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