It is acceptable to record prepayment of expenses as debits to expense accounts if an adjusting entry is made at the end of the period to bring the asset account balance to the correct unused or unexpired amount.

Question

Quizplus · Accepted Answer

This statement is true. Prepayments of expenses can be initially recorded as expenses if an adjusting entry is made at the end of the period to adjust the balance of the asset account. The adjusting entry will bring the asset account balance to the correct unused or unexpired amount, while also recognizing the appropriate expense in the period it was incurred.

It Is Acceptable to Record Prepayment of Expenses as Debits