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Prepayments occur when:
a. Cash payment (or an obligation to pay cash) occurs before the expense recognition.
b. Sales are delayed pending credit approval.
c. Customers are unable to pay the full amount due when goods are delivered.
d. Cash payment occurs after the expense is incurred and liability is recorded.

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Answer:

a. Cash payment (or an obligation to pay cash) occurs before the expense recognition.

Explanation:

Prepayments are amounts paid to a business before goods or services are received. This means that a prepayment is the payment of an obligation, bill, or expense before its due date, which is therefore,  also before the expense recognition.

The correct answer is alternative a. Cash payment (or an obligation to pay cash) occurs before the expense recognition.

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