Prepayment
An expense paid in advance that relates to a future period.
Expenditure paid before the reporting date that relates to a future period, recognised as an asset at the reporting date.
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On 1 September the business paid an annual insurance premium of £3,600 covering the 12 months to 31 August next year. The year end is 31 December. What is the prepayment at the year end?
£1,200
£0
£2,400
£3,600
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