Different words are used to express the same concept - or a single word can take on different meanings depending upon the context.
In today's example, the word that creates the confusion is an adjective, and that adjective is "pre-paid."
When you pre-pay expenses - such as paying for a year's cleaning service in advance - you are actually creating an asset on your Balance Sheet, called something like "Pre-Paid Cleaning Services."
The expense is reflected on your income statement when the cleaning actually happens. And at that time, the Pre-Paid Cleaning asset decreases.
So, a pre-paid expense is not an expense… it’s an asset. And the language of business is full of such language paradoxes.
Regards, Peter