Deferred charges are distinguished from prepaid expenses on the basis of the time over which their benefits will be realized.

Question

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Deferred charges refer to costs that are expected to benefit the company over a period of time longer than one year, while prepaid expenses are costs that are expected to provide benefits within the current year. Therefore, the distinction between these two depends on the expected time period over which the benefits will be realized.

Deferred Charges Are Distinguished from Prepaid Expenses on the Basis