When an expense is paid in cash before it is used, it is called a(n)
A) prepaid expense.
B) accrued expense.
C) estimated expense.
D) cash expense.

Question

Quizplus · Accepted Answer

When an expense is paid in cash before it is used or incurred, it is called a prepaid expense. This is because the payment has been made in advance, and the expense will be recognized as incurred or used over time, usually through an amortization process. Accrued expenses, on the other hand, are expenses that have been incurred but have not yet been paid or recorded, and estimated expenses are expenses that are estimated but not yet incurred or paid. Cash expenses are simply expenses that are paid in cash, but they may or may not be prepaid.

When an Expense Is Paid in Cash Before It Is