What is your understanding of deferred expenses, and what accounting treatment would you suggest for them?

Question

Accepted Answer

Deferred expenses are costs that have been paid but not yet incurred, and should be recognized as assets on the balance sheet.

Deferred expenses are costs that have been paid in advance but have not yet been incurred.
They are recognized as assets on the balance sheet until they are actually incurred.
Once the expenses are incurred, they are then recognized as expenses on the income statement.
Common examples of deferred expenses include prepaid insurance, prepaid rent, and prepaid advertising.
Accounting treatment for deferred expenses involves initially recording them as assets and then gradually recognizing them as expenses over the period they benefit.
This process is known as amortization or allocation of the deferred expenses.

Top Senior Finance Associate Interview Questions Asked at Axa XL