Prepaid expenses appear:
A)As an expense on the income statement.
B)As an asset on the balance sheet.
C)As a liability on the balance sheet.
D)As a reduction to retained earnings.

Question

Quizplus · Accepted Answer

Prepaid expenses are future expenses that have been paid in advance. They are considered assets because the company has paid for a good or service that will be used or consumed in the future. As the good or service is used, the prepaid expense is gradually recognized as an expense on the income statement. Therefore, prepaid expenses appear as an asset on the balance sheet.

Prepaid Expenses Appear