Deferred Expense – Definition & Example
Deferred expense (also known as prepaid expense) is the cost which has been incurred but the product or service has not yet been received or consumed.
As this is the cost for advance payment, this is treated as current assets (If the underlying goods or services are expected to be taken within a year) on balance sheet of a company.
This expense becomes actual expense at the time when good or services are used by the company. At that time a reversal entry is made to settle the balance.
Rent paid in advance, Insurance premium paid etc. are the examples of prepaid expense.