Prepaids Financial Glossary

What is it? Expenses that are capitalized as assets on a firms financial statements because they will be charged against activities in the near future rather than past activities. Also called prepaid expenses, prepaid assets or prepaid items. For example, if insurance premiums for the next six months are paid today, the amount paid may be shown as a pre- paid asset. The asset in that example would then be reduced to zero over the following six months by recognizing one-sixth of the amount as an expense in each of next six months. Insurance, taxes, and subscriptions are common prepaid expenses.

Finance Term Definition Added By: Peyton

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