Question

A prepaid expense is

a payment received by the company in advance for the future sale of inventory or performance of services

an item of goods or services purchased by the company for use in its operations but not fully consumed by the end of the accounting period

an expense that has been incurred during the accounting period but has been neither paid nor recorded

an item that has been earned by the company during the accounting period but has been neither received nor recorded

Answer 1

A prepaid expense is an item of goods or services purchased by the company for use in its operations but not fully consumed by the end of the accounting period.

second option is the correct option.

Prepaid expense signifies a payment made in advance for which services will be used in future . Hence, all prepaid expenses are treated as current asset.