Final answer:
Prepaid expenses are costs of assets acquired b) before they will be expensed. They are recorded as assets on the balance sheet and recognized as expenses when the assets are used or consumed over time.
Step-by-step explanation:
The correct answer is option (b) before they will be expensed.
Prepaid expenses are costs incurred for assets that will provide benefits to a business in future periods. These assets are paid for in advance before they are actually used or consumed.
Examples of prepaid expenses include prepaid rent, prepaid insurance, and prepaid advertising.
When a business incurs a prepaid expense, it records it as an asset on the balance sheet, not as an expense on the income statement.
The expense is recognized and recorded when the asset is used or consumed, which usually occurs over a period of time or multiple accounting periods.