Question

Prepaid expenses will become ________ when their future benefits expire.

Group of answer choices
a.expenses
b.revenues
c.assets
d.liabilities

Answer 1

Prepaid expenses are initially recorded as assets, but once their benefits are realized or expire, they are recorded as expenses on the income statement.

Step-by-step explanation:

Prepaid expenses will become expenses when their future benefits expire. Prepaid expenses are considered assets on a company's balance sheet when they are paid for in advance.

However, once the service or benefit is used or expires, that asset is then recorded as an expense on the income statement because the benefit of the prepaid expense has been realized.

This process is part of accrual accounting and helps in matching expenses with revenues in the period in which they are incurred.