Prepaid expense is defined as cash paid for an expense in one fiscal period that is not used until a later period.
Expenses that a business pays in advance in return for future delivery of goods or services are known as prepaid expenses. They usually involve the purchase of goods that are advantageous to the organization across a number of accounting periods.
A prepaid expense is one that has been paid for up front but hasn't yet been incurred. It results in a prepaid expense, which is shown as an asset on the balance sheet, when a company makes an advance payment for products or services that will be received in the future.
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