Difference between prepaid expense and advance

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Quick Summary

Prepaid expense is payment for services already received but benefits extend to future periods. Advance is payment made before receiving goods or services, with possibility of refund or adjustment.

Anil

Anil (Querist)
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31 July 2014 what is the difference between prepaid expense and advance.

Guest

Guest (Expert)

31 July 2014 Expenses is amount spent for a particular expense

advance can b for whatever purchase,expense,staff travelling, etc etc

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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31 July 2014 prepaid is mostly in relation to exp say for max next year but advance is mostly given to creditors

CA. Rajesh P. Ahir

CA. Rajesh P. Ahir (Expert)
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25 June 2020 Both terms expained here with regards to expenses (not with regards to Loan)

Pre-paid is more related to amount paid for expenses incurred/services rendered but the benifits of which will continue to flow in next financial years. This is normaly arises in case of services. Here the Chances of getting the amount back is very less or remote.
Advance is payment without receipts of Goods/Services. There can be a case where the Advance amount paid can be return back. So there is possiblity of getting goods/services or the money.

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