Yes, you are right. In general, you can't deduct prepaid expenses, but there are certain circumstances you can. From Nolo:
You may use the 12-month rule for business insurance premiums, business licenses, rents and leases, and payments to terminate business contracts. However, you may not use it for payments for interest, loans, and other financial interests, or purchases of furniture, equipment, and other long-term capital asset.
From Pub 538
Income
Under the cash method, you include in your gross income all items of income you actually or constructively received during the tax year. If you received property and services, you must include their fair market value (FMV) in income.
Expenses
Under the cash method, generally, you deduct expenses in the tax year in which you actually pay them. This includes business expenses for which you contest liability. However, you may not be able to deduct an expense paid in advance. Instead, you may be required to capitalize certain costs, as explained later under Uniform Capitalization Rules.
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