Prepaid expenses: Learn how to record prepaid expenses

Learn how to record prepaid expenses in accounting with examples and quizzes. Prepaid expenses are those expenses paid in advance for a benefit yet to be received. Prepaid expenses arise when a company pays in advance for goods or services it will receive in the future. Common examples include rent, insurance premiums, and legal retainers. Prepaid expenses are those expenses which have been paid in advance, however, the related benefits are not received within the same.. Learn what prepaid expenses are, how to account for them under accrual and cash basis, and see common examples of prepaid expenses such as lease contracts, software subscriptions, and insurance premiums. Find out how prepaid expenses affect liquidity ratios and financial reporting.