Prepaid expenses involve payment of cash (or an obligation to pay cash)for the purchase of an asset before the expense is incurred.

Question

Quizplus · Accepted Answer

Prepaid expenses are assets that represent cash paid for goods or services that will be received at a later time. The payment is made before the expense is incurred, hence the term "prepaid." This is typically recorded as an asset on the balance sheet until the expense is incurred and then it is recognized as an expense on the income statement.

Prepaid Expenses Involve Payment of Cash (Or an Obligation to Pay