Deferred expenses, also known as prepaid expenses or capitalized expenses, are costs that have been incurred but not yet recognized on the income statement. They are assets that have been recorded on a company’s balance sheet and are set to be charged against income when they become eligible for expensing. In other words, deferred expenses represent upfront investments made by a company with the expectation of future benefits. To increase efficiency, many companies opt to capitalize their deferred expenses as it helps them track their spending better and provide insight into their operations.