what is the impact of Prepaid expenses on Balance Sheet and how to Treated in Final Accounts.

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Accepted Answer

Prepaid expenses impact balance sheet as assets and are treated as expenses in final accounts.

Prepaid expenses are expenses paid in advance for goods or services that will be received in the future.
They are recorded as assets on the balance sheet until they are used or expire.
In the final accounts, prepaid expenses are treated as expenses and deducted from the total expenses to arrive at the net profit.
If the prepaid expenses have not been fully utilized by the end of the accounting period, they are carried forward as assets to the next period.
Examples of prepaid expenses include prepaid rent, insurance premiums, and prepaid advertising costs.

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