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What is the difference between deferred and prepaid expenses?

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Question added by Omer Lebbe Niyas , Senior Accountant , M/s. Al Million Services Trading & Contracting. Co W.L.L
Date Posted: 2016/02/22
Murtaza Jamal Hossain Murtaza
by Murtaza Jamal Hossain Murtaza , Senior Manager Finance and Accounts , Jaiprakash Associates Limited

Difference in Deferred and Prepaid expenses is due to time frame, i.e when an expenses is incurred and its benefit can be derived in long time means more than one year it is classified as deferred expenses and classified as Non Current Assets for example a heavy expenses made for Advertisement whose benefit may be derived in five years or so. Where as an expenses such as rent paid in advance for a year is treated as prepaid Expenses and is classified in Balance Sheet as Current Assets.

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