Question

Which of the following are examples of prepayments?

a)Purchasing supplies that will be used later
b)Revenue collected when it is earned
c)Expense paid when it is incurred

Answer 1

Prepayments are expenses paid in advance for future use. Examples include purchasing supplies that will be used later.

Step-by-step explanation:

The examples of prepayments are:

1. Purchasing supplies that will be used later: This is an example of a prepayment because the supplies are paid for in advance but will be used at a later date.
2. Expense paid when it is incurred: This is not an example of a prepayment because the expense is paid at the same time it is incurred.