Prepaid Expense

Beginner 💰 Finance / Accounting

Definition

Money you paid in advance for something you haven't used yet—like paying for next year's insurance today.

Example Usage

We have $50,000 in prepaid insurance that we'll expense over the next 12 months.

Origin

Accrual accounting standard

Fun Fact

Prepaid expenses are technically assets until you 'use them up' by the accounting calendar

Source: GAAP accounting standard

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