What is typically subtracted from the Opening Balance of prepaid expenses?

The concept of prepaid expenses in accounting refers to payments made in advance for goods or services that will be received in the future. The opening balance of prepaid expenses on the balance sheet represents the amount that has been paid but not yet consumed or utilized by the end of the accounting period.

To calculate how much prepaid expense remains at the end of the period, the closing balance reflects what is left after accounting for the expenses utilized during that period. Thus, to determine adjustments to the opening balance of prepaid expenses, the closing balance—representing the remaining prepaid amount—would be subtracted from the opening balance.

This deduction essentially allows businesses to recognize the portion of the prepaid expenses that has been consumed as an expense in the income statement, thereby adjusting the asset side of the balance sheet accurately for the next period. The other options do not relate directly to the calculation of prepaid expenses; net cash inflows pertain to cash flow management, previous year’s expenses are historical figures rather than current balances, and revenue from sales pertains to income generation rather than expense tracking.