Asked by Ismael Santiago on Jun 24, 2024
Verified
Prepaid expenses are
A) paid and recorded in an asset account before they are used or consumed.
B) paid and recorded in an asset account after they are used or consumed.
C) incurred but not yet paid or recorded.
D) incurred and already paid or recorded.
Prepaid Expenses
Payments made in advance for goods or services, which are recognized as assets on a balance sheet and expensed over time as the benefit is received.
Asset Account
An account that records the value of resources owned by an entity, which can provide future economic benefits.
- Determine and interpret the diverse adjusting entry types: prepaid expenses, deferred revenues, depreciation, and adjustments related to supplies.
- Perform adjusting entries for prepaid expenses and understand their effect on financial statements.
Verified Answer
AA
ahmed al massJun 27, 2024
Final Answer :
A
Explanation :
Prepaid expenses are payments made for goods or services to be received in the future. They are recorded as assets on the balance sheet because they represent future economic benefits to the company. As these goods or services are used or consumed, the prepaid amount is gradually expensed.
Learning Objectives
- Determine and interpret the diverse adjusting entry types: prepaid expenses, deferred revenues, depreciation, and adjustments related to supplies.
- Perform adjusting entries for prepaid expenses and understand their effect on financial statements.
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