When cash is paid for something that provides benefits only in future periods:

Question

Quizplus · Accepted Answer

It is common for businesses to pay for something that provides benefits only in future periods.Under the expense recognition principle,the expense from using these benefits is reported as an expense when the benefit is used to earn revenue,not in the current month,when the payment was made.Instead,an asset (such as Supplies,Prepaid Rent,or Prepaid Insurance)is recorded when the payment is made.

When Cash Is Paid for Something That Provides Benefits Only