Learn what prepaid expenses are, how to classify them as an asset or expense on your financial statements, and examples of prepaid expenses. Get ideas here. A prepaid expense is an expense that is paid for in advance. Recurring expenses such as insurance and rent can be paid for with one payment that covers the cost of the expense for several months or even a year. Often, businesses prepay expenses in this manner because they can receive a discount. Prepaid expenses also provide a benefit to a business by relieving the obligation of payment for future accounting periods. In this manner, prepaid expenses are considered an asset. Anything that has ... Prepaid expenses are costs you pay up front for goods or services that you'll use in future accounting periods. See common examples and how to record them. Prepaid expenses arise when a company pays in advance for goods or services it will receive in the future. Common examples include rent, insurance premiums, and legal retainers.
