If prepaid costs are initially recorded as an asset no adjustment will be required in the future.

Question

Quizplus · Accepted Answer

Prepaid costs are initially recorded as an asset on the balance sheet, but they represent expenses that will be incurred in the future. As those expenses are incurred, the prepaid costs asset decreases and the related expenses are recognized on the income statement through an adjusting entry. Therefore, an adjustment will be required in the future to recognize the expense and decrease the prepaid costs asset.

If Prepaid Costs Are Initially Recorded as an Asset No