Which of the following is an example of a prepaid expense?

A prepaid expense refers to a payment made in advance for goods or services that will be received in the future. This concept is significant in accrual accounting, where expenses are recognized when they are incurred, not necessarily when payments are made.

In this context, the option identifying money paid in advance for future benefit accurately defines a prepaid expense, as it reflects the nature of such transactions. Examples include payments for insurance premiums, rent, or subscriptions paid upfront for a future period. The business recognizes these payments as assets on the balance sheet until the service or benefit is realized over time.

The other options represent different financial scenarios that do not fit the definition of a prepaid expense. For instance, money owed to the business indicates accounts receivable, while money paid for services not yet provided reflects unearned revenue. Lastly, money owed to external parties pertains to liabilities. Each of these descriptions entails a unique aspect of business transactions that relate to different accounting principles, distinguishing them from the concept of prepaid expenses.