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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.

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