Question

State the meaning of Prepaid expenses

Answer 1

Prepaid Expenses: These refer to those expenses for which the benefits have not been realised but the payments have already been made in advance.

These are basically the advance payments for the next year, which are made in the current accounting period.

Example: Prepaid insurance premium of ₹ 1,000 means that the payment of ₹ 1,000 is made in advance for the next accounting period.