Question

Answer in one sentence.

What do you mean by prepaid expenses?

Answer 1

Prepaid expenses are the expenses that have been paid in advance for the next year during the current year. Prepaid expenses are the assets of a business and shown under the head of Current Assets because the benefit from them will be accrued in future. For example: Insurance premium worth Rs 6,000 is paid in the month of June 2013, for full year. Books are closed on 31^st March every year. Thus, Rs 1,500 will be treated as prepaid expenses, for the current year 2013.