What is Prepaid Expenses?


Prepaid Expenses

Payments may be made for items which benefit a business for over more than one accounting period.  Examples are Rent or Insurance premiums which can be paid for period covering more than one accounting period. At the end of an accounting period the portion of the expired time period has to be transferred to the profit and loss account as an expense.  The unexpired portion of the payment not used in the current accounting period will be carried forward as an asset to the next accounting period, which it is expected to benefit.

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