Amortize Prepaid Expense is an accounting practice where a company sets aside money to cover the cost of a service or asset that was paid for upfront. This practice allows companies to spread out the expense over a certain period of time, typically matching the length in which the asset will be used up. By amortizing a prepaid expense, businesses are not only able to more accurately track expenses and subsequently allocate resources better, but they’re also able to lessen their current taxable income as well.
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