The adjustment to be made for prepaid expenses is
A)Add prepaid expenses to respective expenses and show it as an asset
B)Deduct prepaid expenses from respective expenses and show it as an asset
C)Add prepaid expenses to respective expenses and show it as a liability
D)Deduct prepaid expenses from respective expenses and show it as a liability

Question

Quizplus · Accepted Answer

Prepaid expenses are payments made for services or goods to be received in the future. They are considered assets because they represent future economic benefits. When adjusting accounts, prepaid expenses are deducted from the respective expense accounts (since they have not yet been incurred as expenses) and are shown on the balance sheet as assets. This reflects that the payment has been made, but the benefit of the service or goods will be received in a future period.

The Adjustment to Be Made for Prepaid Expenses Is