A prepayment is the cash paid for goods / services before their due date of receipt or invoice.
In other words the entity has ordered and paid for goods / services but has not received anything yet from him.
As some services are paid in advance.
Two common examples of a prepaid expense are rent and insurance. For example payments are made at the starting of the coverage period. With rent, payments are usually made at the start of the month and cover use of the property for that month.
insurance -people and businesses make payments for coverage that extends for period of time after the payment is made