When payment for insurance is made advance of actual expenses then it is called prepaid insurance which is asset for business until insurance benefit is utilized while insurance expense is actual insurance expense when insurance benefit is taken.
Expense is that amount benefit of which has already taken by company while prepaid expense is that amount paid the benefit of which not yet taken but available to be taken in future period.
Prepaid rent is an asset and represents and advance payment for a future benefit Rent expense is an expense and is the expended portion of the rent consumed.
Prepaid insurance would be an asset. Insurance expense is when the insurance has been used up, thus making it an actual expense on the Income Statement. Whereas Prepaid Insurance on a Balance sheet is classified as an Asset.
Prepaid expense is a payment which relevant to services which expected to delivered in the next accounting period, while advance expense is an expense paid in advance for services expected to delivered in the current accounting period.
Expense is any cost that the firm incurs to earn the particular revenue. Most expense are required to be paid except for a few "non-cash expense" such as depreciation. Prepaid, as suggested, are expenses paid in advance but have not yet "used" to generate revenue. It is to be used at a later date. One example of a prepaid expense would be rent i.e. prepaid rent. The owner pays the rent for the next 2 months at $100 per month. Prepaid rent = $200.
Expense is that amount benefit of which has already taken by company while prepaid expense is that amount paid the benefit of which not yet taken but available to be taken in future period.
Prepaid rent is an asset and represents and advance payment for a future benefit Rent expense is an expense and is the expended portion of the rent consumed.
Prepaid insurance would be an asset. Insurance expense is when the insurance has been used up, thus making it an actual expense on the Income Statement. Whereas Prepaid Insurance on a Balance sheet is classified as an Asset.
Prepaid expense is a payment which relevant to services which expected to delivered in the next accounting period, while advance expense is an expense paid in advance for services expected to delivered in the current accounting period.
Prepaid is that amount of expense which is paid in advance and expense not occured while unearned account is that amount where amount for services received in advance but services not provided.
There isn't much of a difference between a prepaid expense and a deposit. Both terms are monies that are paid in advance to pay for something. With a prepaid expense, the money pays usually for a bill or utility. A deposit on the other hand, is sometimes given back after the obligation is paid. If it is not paid, the deposit is kept as payment.
Expenses already incurred but not necessarily for the current accounting period is prepaid expense. In the case of advance, the expenses even though identified, have not been incurred but only cash has been taken out for the purpose of incurring such expense.
Expense is any cost that the firm incurs to earn the particular revenue. Most expense are required to be paid except for a few "non-cash expense" such as depreciation. Prepaid, as suggested, are expenses paid in advance but have not yet "used" to generate revenue. It is to be used at a later date. One example of a prepaid expense would be rent i.e. prepaid rent. The owner pays the rent for the next 2 months at $100 per month. Prepaid rent = $200.
what is the difference between freight prepaid and freight prepaid abroad
The decrease in cash is likely due to the prepayment of expenses, where cash is used to pay for future expenses in advance. This leads to an increase in prepaid expenses on the balance sheet as the expenses are prepaid but not yet incurred. Over time, as the prepaid expenses are used up, they are expensed and cash balances will start to increase again.
Dr. Prepaid expence (balance sheet) Cr. Expense (income statement) e.g. you have already paid $1200 insurance, but at year end still have six months to go until you have to renew your premium. You would have expensed the full $1200 - now you need to remove the unused (prepaid) portion. Dr. Prepaid expense $600 Cr. Insurance $600
A prepaid expense such as insurance is an operating cost and thus would be recorded under operating expenses