The Vendor Deposits and Prepaid Expenses account records advanced amounts paid to vendors for goods or services to be delivered in the future. Vendor deposits are generally non-refundable payments made before they receive it and the delivery of the goods, while prepaid expenses are amounts paid for future services like insurance or rent. These advances are typically recorded as an asset at first and then expensed over time as the goods or services are received or utilized. By recording it this way, it enables a more accurate matching of expenses with the periods in which they are incurred. This also allows the vendor to maintain proper cash flow resources and may afford users more accurate reporting of expenses for the company.