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.

deferred expenseAs 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.

Vikas Sharma

Vikas Sharma is the chief author at Monetary Section. He is an MBA (finance) from GJIMT Mohali. He started his career in 2014 and at the same time he started this website. He is young enthusiast who loves to educate people about finance. To reach out to the people from all territories, he chose internet as a medium.

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