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A prepaid expense is an expense you pay before you have incurred an obligation to pay it. Paying three months rent in advance is an example. Prepaid expenses are viewed as an asset on the balance sheet which is reduced as the expense is incurred. For example, every month in which rent falls due would be a reduction of your prepaid rent asset and a recognition of an expense equal to the amount of the reduction.
Accrued expenses, on the other hand, are essentially the opposite. For example, assume you didn't prepay your rent. As the rent expense is incurred, a liability is created. After you actually make your payment, the liability is reduced by the amount of your payment.
Wiki User
∙ 13y ago
Wiki User
∙ 10y agoIncurred expenses means expenses done and paid while accrued expenses means expenses occurred but still payment remains
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How does prepaid expense and accrued expense affect the profit of a business?
it will either increase or decrease profit. Prepaid expense should increase profit as the amount has been overstated.
What the difference between expense and prepaid expense?
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.
What is the difference between prepaid rent and rent expense?
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.
Is prepaid rent accrued?
Yes, prepaid rent is accrued.
What is the difference between prepaid expense and advance payment?
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.
What is the difference between prepaid unearned account?
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.
How is an accrued expense adjusted using journal entries?
Adjustment of accrued expenses means to adjust the previously recorded accruals like prepaid expenses or outstanding liabilities etc.
What is difference between prepaid expenses and deposits?
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.
What is the difference between prepaid expense and advances?
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.
What the difference between expense and prepaid expense with example?
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 prepaid insurance and insurance expense?
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.
What is the difference between freight prepaid abroad and freight prepaid?
what is the difference between freight prepaid and freight prepaid abroad
