Is Prepaid Expense Debit or Credit?

Prepaid expenses are recorded with a debit entry. When a business pays for a future expense in advance, it debits the Prepaid Expense account to increase its balance, reflecting the amount paid. The corresponding credit entry is typically made to the Cash or Bank account, indicating that funds have been disbursed. As the prepaid expense is utilized over time, adjusting entries are made to reduce the Prepaid Expense account and recognize the expense on the income statement.