An asset created by prepayment of an expense is:
A) Recorded as a debit to an unearned revenue account.
B) Recorded as a debit to a prepaid expense account.
C) Recorded as a credit to an unearned revenue account.
D) Recorded as a credit to a prepaid expense account.
E) Not recorded in the accounting records until the earnings process is complete.

Question

Quizplus · Accepted Answer

When an expense is prepaid, it is recorded as an asset under the prepaid expense account. The debit entry to the prepaid expense account reflects an increase in assets. The application of expenses to future periods is achieved through the periodic recognition of part of the prepaid asset as an expense in the income statement.

An Asset Created by Prepayment of an Expense Is