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LSDefine
Simple English definitions for legal terms
deferred expense
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A quick definition of deferred expense:
A deferred expense is a cost that a business incurs but expects to benefit from over a period of time beyond the current year. An example of a deferred expense is a prepaid subscription to a business periodical, where the cost will be recognized as an expense over a multiyear subscription period. It is different from an accrued expense, which is an expense incurred but not yet paid. A deferred expense is not immediately deductible, but it can be used for depreciation or amortization.
A more thorough explanation:
A deferred expense is a cost incurred by a business that will benefit the business over a period beyond the current year. This means that the expense is paid for now, but the benefit will be received in the future. An example of a deferred expense is a prepaid subscription to a business periodical, where the cost will be recognized as an expense over a multiyear subscription period.
Another example of a deferred expense is when a company pays for a long-term asset, such as a building or equipment, that will provide benefits for many years. The cost of the asset is not recognized as an expense in the year it is purchased, but is instead recognized over the useful life of the asset through depreciation or amortization.
Overall, a deferred expense is an expense that is paid for now, but the benefit will be received in the future.