Prepaid expenses are:
A) Payments made for products and services that do not ever expire.
B) Classified as liabilities on the balance sheet.
C) Decreases in equity.
D) Assets that represent prepayments of future expenses.
E) Promises of payments by customers.

Question

Quizplus · Accepted Answer

Prepaid expenses are assets that represent prepayments of future expenses. Examples include prepaid rent, prepaid insurance, and prepaid advertising. These expenses are initially recorded as assets on the balance sheet and are later expensed when they are used or consumed.

Prepaid Expenses Are