More of this Feature • Go Back to Part 1 • Part 29: Microsoft's Bal. Sheet • Part 30: Analyzing MSFT • Part 31: Sturm Ru. Bal.  Sheet • Part 31: Analyzing Sturm Ruger • Part 32: Wendy's Bal. Sheet • Part 33: Analyzing Wendy's • Lesson 3 Quiz

Join the Discussion "My employer gives me the option of having money taken out of my paycheck and putting it in an investment.  Is this a good idea?" Read More...

Related Resources • Investing Lesson 1 • Investing Lesson 2 • Investing Lesson 3 • More Investing Lessons

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Prepaid Expenses

In the course of every day operations, businesses will have to pay for goods or services before they actually receive the product.  If a department store moved into your neighborhood mall, most likely they would sign a rent agreement and be required to pay for twelve months' rent in advance.  If the monthly rent was $1,000 and the business prepaid for an entire year, they would put $12,000 on the balance sheet under Prepaid Expenses ($1,000 monthly rent x 12 months = $12,000).  Each month, they would deduct 1/12 from the prepaid expenses until the end of the year, at which point, the amount would be $0.

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