Explain OTC Process, Prepaid and Accrual difference About financial statements

Question

Accepted Answer

OTC process involves immediate payment, prepaid expenses are paid in advance, accrual expenses are recognized when incurred.

OTC (Over-the-Counter) process involves immediate payment for goods or services without the need for credit.
Prepaid expenses are payments made in advance for goods or services that will be received in the future.
Accrual expenses are expenses that have been incurred but not yet paid for or recorded in the financial statements.
Prepaid expenses are recorded as assets on the balance sheet until they are used or expire.
Accrual expenses are recorded as liabilities on the balance sheet until they are paid.
Financial statements reflect the OTC sales, prepaid expenses, and accrual expenses to provide an accurate picture of the company's financial health.

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