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  2. In short, a prepayment is recorded as an asset by a buyer, and as a liability by a seller. These items are usually stated as current assets and current liabilities, respectively, in the balance sheet of each party, since they are generally resolved within one year.

    www.accountingtools.com/articles/how-to-account-f…
    A prepayment is shown in the balance sheet as a current asset. The balance sheet example below shows the prepayment. When the expense is incurred, it will transfer from the balance sheet to an expense in the Profit and Loss account.
    www.businessaccountingbasics.co.uk/prepayments/

    When a company prepays for an expense, it is recognized as a prepaid asset on the balance sheet, with a simultaneous entry being recorded that reduces the company's cash (or payment account) by the same amount.

    www.investopedia.com/ask/answers/052815/how-a…
     
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