Is a Prepayment an Asset

What Is a Prepaid Expense? A prepaid expense is a type of asset on the balance sheet that results from a business making advanced payments for goods or services to be received in the future. Prepaid expenses are initially recorded as assets, but their value is expensed over time onto the income statement.

Is a prepayment an expense?

Prepaid expenses are future expenses that are paid in advance. On the balance sheet, prepaid expenses are first recorded as an asset. After the benefits of the assets are realized over time, the amount is then recorded as an expense.

Are prepaid accounts an asset?

An expenditure determined to be prepaid is initially recorded in the prepaid expenses account, which is an asset account.