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Definition

Prepaid expenses

Prepaid expenses or prepayments are companies record payments of expenses that will benefit more than one accounting period, an asset account is increased (debited) to show the service or benefit that the company will receive in the future. Examples of the common prepayments are insurance, supplies, advertising, and rent, in addition, companies make prepayments when they purchase building s and equipment.

Prepaid expenses are costs that expire either with the passage of time (e.g. rent and insurance) or through use (e.g. suoolies).

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