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Unlike conventional expenses, the business will receive something of value from the prepaid expense over the course of several accounting periods. Prepaid expenses are payments made in advance for goods and services that are expected to be provided or used in the future. While accrued expenses represent liabilities, prepaid expenses are recognized as assets on…
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Both options spread the cost of an asset over its useful life and a company doesn’t gain any financial advantage through one rather than the other. A company buys machinery for USD 100,000 which has an expected life of 10 years. Each year, the machinery loses its value so the company will depreciate it. If…