What is meant by prepayments in accounting?



Prepayment are items of expenses that relate to future periods but which have already been paid for and are shown in expense of the current period. They must be excluded from the current period expenses as they relate to future period.
In other words, the prepayment is amount of money paid in advance for the benefits that will be received in the next accounting period.



Example of prepayment could include rent prepaid, phone credit prepaid and so forth.

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