Which of the following is not an expense?

Question

BlackTom AI · Accepted Answer

To tackle the question, I’ll compare each option to the concept of an expense in accounting.
Option 1: Prepaid Rent. This is paid in advance for future occupancy and is recorded as an asset (prepaid expense) on the balance sheet until the benefit is consumed over time. Therefore, at the moment of payment it is not an expense, though it will become one periodically as the rent benefits are used.
Option 2: Advertising. This is a cost incurred to promote the business and-to the extent it is paid or incurred during the period-this is recognized as an expense on the income statement. It does not provide future economic benefits in the form of a prepaid asset, so it is an expense.
Option 3: Electricity. This is a service consumed during the period, and the corresponding cost is recognized as an expense in that period. It reflects ongoing operating costs and is not something prepaid to be amortized later.
Option 4: Wages. Wages represent compensation for labor used during the period and are recorded as an expense for the period in which the work is performed. Like electricity and advertising, wages are an expense rather than a deferred asset.
Thus, among the options, Prepaid Rent stands out as not being an expense at the time of payment; it is an asset that will be expensed over time as the benefit is enjoyed.

Which of the following is not an expense?

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