Which account is classified as an Asset?

• A. Prepaid Rent
• B. Wages Expense
• C. Fees Earned
• D. Advertising Expense

Answer: (A)

Assets are resources controlled by the business that will bring future economic benefits. Prepaid Rent fits this idea because when you pay rent in advance, you obtain the right to use the space in future periods; that right represents a benefit that will be consumed over time, so it’s recorded as an asset. As time passes, you reduce the asset and recognize Rent Expense to reflect the period’s cost.

The other options are costs or revenue: Wages Expense records the cost of labor used in earning revenue, Fees Earned represents revenue, and Advertising Expense records a marketing cost. They do not represent future benefits owned by the business, so they are not assets.