Final answer:
A Prepaid expense represents an expense paid in advance that creates future benefits, such as insurance premiums or rent paid before the coverage period or rental period begins.
Step-by-step explanation:
The item that represents an expense paid in advance that creates benefits used in the future is a Prepaid expense. Prepaid expenses are costs that have been paid but not yet incurred in the accounting period. An example of a prepaid expense could be an insurance premium that is paid at the beginning of the year for coverage that extends over several months or rent paid in advance.
This contrasts to accrued expenses, which are expenses that have been incurred but not yet paid, deferred expenses (another term for prepaid expenses), and operating expenses, which are the routine expenses incurred in the normal course of business operations.