Prepaid Expenses, Unearned Income, and Other Current Assets

Abstract

Prepaid expense is an expenditure that is paid for in one accounting period, but for which the underlying asset will not be entirely consumed until a future period. Therefore, prepaid expense must not be shown as expense in the accounting period in which it is paid, but instead it must be presented as such in the subsequent accounting periods in which the services in respect of the prepaid expense have been performed.