Question

Difference between deferred expense and prepaid expense

Answer 1

This deferred expense will be reported on the balance sheet as a noncurrent or long-term asset. Often the term prepaid expense indicates that a payment was made less than one year before the cost is expensed. This prepaid expense is reported as a current asset.

Answer 2

A deferred expense is a cost that has already been incurred, but which has not yet been consumed. The cost is recorded as an asset until such time as the underlying goods or services are consumed; at that point, the cost is charged to expense.

prepaid expense indicates that a payment was made less than one year before the cost is expensed. Thisprepaid expense is reported as a current asset.

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