A business pays cash into an escrow account held by a third party in respect of a property transaction. The amount remains the property of the business until the transaction is complete and shows as a current asset in the balance sheet of the business.
Prepaid rent is an expense which has been paid in advance.
A business has an annual office rent of 12,000 and pays the landlord 3 months in advance on the first day of each quarter. On the 1 April it pays the next quarters rent in advance of 3,000 to cover the months of April, May and June It has a prepaid expense of 3,000.
A prepaid expense is an expense which has been paid in advance.
A business has an annual premises rent of 60,000 and pays the landlord quarterly in advance on the first day of each quarter. On the 1 January it pays the next quarter rent of 15,000 to cover the 3 months of January, February, and March. It has a prepaid expense of 15,000.