What do we call cash that is paid by the company before the expense has been incurred?

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Study for the Texas Aandamp;M University (TAMU) ACCT229 Exam. Get exam-ready with flashcards, detailed explanations, and multiple choice questions. Enhance your understanding and boost your confidence!

The correct term for cash that is paid by a company before the expense has been incurred is referred to as prepaid expenses. These represent future economic benefits that a company has paid for in advance. When a business makes a payment for an expense that will be recognized in a future accounting period, it records that payment as an asset on its balance sheet. As time passes and the benefit is realized, the prepaid expense is then gradually expensed on the income statement.

The term "deferred expenses" generally includes prepaid expenses, but it is not as commonly used in accounting terminology in the context of introductory courses as "prepaid expenses." In contrast, accrued expenses refer to costs that have been incurred but not yet paid, which is a different accounting concept. Delayed expenses is not standard terminology in accounting, and while it may seem intuitive, it does not appropriately describe this situation. Thus, "prepaid expenses" accurately captures the concept of payments made in advance for goods or services to be received in the future.