Difference Between Prepaid Expenses And Preliminary Expenses

Prepaid Expenses are expenses paid in advance against which still the services or benefits are not received while Preliminary Expenses are incurred in order to start or establish a new business. These are necessary initial expenses in order to start a new business.

Prepaid Expenses are current assets and recorded on asset side of balance sheet while preliminary expenses are expenses recorded in Income Statement under the section of miscellaneous expenses for the period.

Examples of prepaid expenses are Prepaid Rent, Prepaid Salary, etc., while Examples of preliminary expenses are Registration Expenses, Legal Expenses, Professional Expenses, etc., paid to register and start a new business as these are necessary for its incorporation.

Prepaid Expenses are also called expenses paid in advance or Unexpired Expenses. Preliminary Expenses are also known as Initial Expenses, Primary Expenses and Pre-Operative Expenses.