prepaid expense(redirected from deferral)
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Related to deferral: Tax deferral
An asset on a balance sheet that comes about from a business making payment for a good or service it has not yet received, but will in the near future. Prepaid expenses are expensed over time as the goods or services are received. A common example of a prepaid expense is an insurance policy. Another example is a lump sum payment for rent; if a company pays for a year's worth of rent in advance, it is recorded as a deferred charge. A deferred charge is also called a prepaid expense.
An expenditure for an item that will provide future benefits. For example, a firm may pay an insurance premium only once a year, resulting in an expense that provides benefits throughout a 12-month period. The unexpired part of the premium is carried on the firm's balance sheet as a prepaid expense.