# Prepaid Expense

*Accounting & Reporting — Finicade finance glossary*

A prepaid expense is cash paid before the benefit is received — annual insurance, rent in advance — booked as an asset and expensed over time.

A prepaid expense is cash paid before the benefit is received — annual insurance, rent paid in advance — recorded as an asset and expensed over the period it covers. It's the mirror image of deferred revenue and a direct consequence of the matching principle: the cost belongs to the months it buys, not the month the cheque cleared.

**Also known as:** prepayments, prepaid asset

**Related terms:** [Accrued Expense](https://finicade.com/glossary/accrued-expense), [Matching Principle](https://finicade.com/glossary/matching-principle), [Accrual Accounting](https://finicade.com/glossary/accrual-accounting), [Working Capital](https://finicade.com/glossary/working-capital), [Journal Entry](https://finicade.com/glossary/journal-entry)

Source: https://finicade.com/glossary/prepaid-expense