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A prepaid expense is the payment for services or goods that will benefit you at a future point in time. When the services or goods that were paid for in advance are utilized, it is at this point that the charge is expensed, or amortized on the income statement. For example, if I paid $1,200 for an insurance policy in Dec of 2011 for coverage over the calendar year 2012, I would have a prepaid expense of $1,200 on my balance sheet as of Dec 31, 2011. I would then amortize $100.00 to the income statement every month (for the coverage being provided to me), until eventually (at the end of the year-2012) the balance in my prepaid account would be zero and I would have amortized the entire $1,200 to the income statement at the rate of $100 per month.

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Q: What is the difference between Prepaid Expenses and Amortization?
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What the difference between expenses and prepaid expenses?

Expenses are those amounts the benefit of which is already taken by business while prepaid expenses are advance payments for those expenses which company will incur in future.


What is difference between advance expenses and prepaid expenses?

i dont have any knowlege.....Nikita Gohil


What is the difference between out standing expense and prepaid expenses?

Outstanding Expenses are expenses which are due at a specific point of time for example if the actual date to pay the rent is 1st july and we don't pay the rent till august end, then it is called the outstanding Expenses (outstanding rent) prepaid Expenses are expenses which are paid in advance for example if we paid the premium of Insurance in advance i.e before due date, then it calls the prepaid expenses.


Differnce between outstanding expenses and prepaid expenses?

prepaid expenses are paid in advance and they are called current assets.The outstanding expense is the unpaid money,still owed.


Difference between outstanding expenses and prepaid expenses?

Outstanding expenses are the expenses which have fallen due at the end of the accounting period but which has not been paid. Its a liability for the company and will be shown under the Current liabilities and provisions. Prepaid expenses are the expenses which paid during the year before its due. The money is paid out but its not due at the end of the period. Its an asset and will be shown under current Assets in the Balance sheet.

Related questions

What the difference between expenses and prepaid expenses?

Expenses are those amounts the benefit of which is already taken by business while prepaid expenses are advance payments for those expenses which company will incur in future.


What is difference between advance expenses and prepaid expenses?

i dont have any knowlege.....Nikita Gohil


What is the difference between freight prepaid abroad and freight prepaid?

what is the difference between freight prepaid and freight prepaid abroad


What is the difference between out standing expense and prepaid expenses?

Outstanding Expenses are expenses which are due at a specific point of time for example if the actual date to pay the rent is 1st july and we don't pay the rent till august end, then it is called the outstanding Expenses (outstanding rent) prepaid Expenses are expenses which are paid in advance for example if we paid the premium of Insurance in advance i.e before due date, then it calls the prepaid expenses.


Differnce between outstanding expenses and prepaid expenses?

prepaid expenses are paid in advance and they are called current assets.The outstanding expense is the unpaid money,still owed.


Difference between outstanding expenses and prepaid expenses?

Outstanding expenses are the expenses which have fallen due at the end of the accounting period but which has not been paid. Its a liability for the company and will be shown under the Current liabilities and provisions. Prepaid expenses are the expenses which paid during the year before its due. The money is paid out but its not due at the end of the period. Its an asset and will be shown under current Assets in the Balance sheet.


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 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 a prepaid tuition plan a college savings plan?

one covers all college expenses, while the other covers only tuition


Which of the following is a difference between a prepaid tuition plan and a college saving plan?

One covers all college expenses, while the other covers only tuition.


What is the difference between prepaid and fixed term contract?

Prepaid is the same as fixed term!


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.