Which type of expense is recorded as an asset before it is utilized?

Prepaid expenses are payments made in advance for goods or services that will be received in the future. These expenses are initially recorded as assets on the balance sheet because the company has not yet consumed the value of these services or goods. Over time, as the services are utilized or the goods are received, these prepaid expenses are recognized as expenses on the income statement, reflecting their consumption.

In contrast, accrued expenses are liabilities that represent obligations for services or goods that have been received but not yet paid for. Deferred revenue refers to payments received in advance for goods or services that are to be delivered in the future, meaning it is recorded as a liability until the service is performed. Current liabilities, on the other hand, are obligations that the company needs to settle within a year, which does not involve recording an asset. Thus, prepaid expenses stand out as the only type that is recorded as an asset before being used.