Question

In: Accounting

What is the difference between accrued expenses compared to prepaid expenses?

What is the difference between accrued expenses compared to prepaid expenses?

Solutions

Expert Solution

Prepaid and accurals relate to the services and goods a company receives from its vendors for which payment has been or will be made .Prepaid expenses are the advance payments for good and services that are to be used up in the future and are classified as an asset on the balance sheet ,while expenses accrual are liabilities ,amounts that have been incurred but have not been paid by a periods end.

Prepaid expenses paid during the current period but related to the next financial period . Accordingly,on an accural basis ,these expenses are excluded from the balance of expenses shown in the balance of audit . This account is shown in the statement of financial position as an asset of a company.

Accrued expenses that related to current period have not yet been paid and did not appear in the balance of expenses, according to the accrual basis ,the expenses is recognized and this account is shown in the statement of financial position in the liabilities side.

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