Final answer:
The missing term in the formula for calculating the ending prepaid expense is 'Expenses incurred.' Prepaid expenses are assets paid for in advance and are expensed over time as they are used.
Step-by-step explanation:
The student has asked a question that involves understanding the calculation of ending prepaid expense in the field of accounting. The correct formula for computing the ending balance of prepaid expenses is: Beginning prepaid expense + Additional payments - Expenses incurred = Ending prepaid expense. It is a component of the adjusting entries made at the end of an accounting period.
Prepaid expenses are future expenses that have been paid in advance and are considered assets on a company's balance sheet. As the benefit of the prepaid expense is used up, the expense is recorded on the income statement and the asset is reduced on the balance sheet. If a company pays rent in advance, this rent is initially recorded as a prepaid expense and then expensed over time as the company occupies the rental space.