Prepaid Expense

Definition

A payment made in advance for a benefit to be received in the future. Initially recorded as an asset, then expensed over time. Examples: prepaid insurance, prepaid rent.

Related Terms

Adjusting Entries

Journal entries made at the end of an accounting period to update accounts before preparing financial statements. These ensure revenues are recorded when earned and expenses when incurred. Common examples: accrued wages, prepaid insurance expiring, depreciation.

Learn More About Accounting

Explore our free lessons and practice labs to master accounting concepts.

Browse Lessons View All Terms