![]() ![]() Accrued expenses are costs that a company has incurred but not yet paid by the end of the accounting period. The 2,000 you expensed for January’s rent appears on your income statement as rent expense, while your prepaid rent asset account is reduced by 2,000 on your balance sheet. A prepaid expense means a company has made an advance payment for goods or services, which it will use at a future date. When it has consumed the prepaid expense fully, it should debit an expense account related to that transaction and credit the prepaid expense account. The key difference is that prepaid expenses are reported as a current asset on the balance sheet and accrued expenses as current liabilities. The Hershey Company – Extract from the balance sheet Prepaid Expenses Versus Accrued Expenses ![]()
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