Prepaid accounts (also called prepaid expenses) are generally:
A) Payments made for products and services that never expire.
B) Classified as liabilities on the balance sheet.
C) Decreases in equity.
D) Assets that represent prepayments of future expenses.
E) Promises of payments by customers.

Question

Quizplus · Accepted Answer

Prepaid accounts are assets that represent prepayments of future expenses. They arise when a company pays for goods or services in advance of receiving them, and are recorded as assets on the balance sheet until the expenses are incurred. Once the expenses are incurred, the prepaid account is reduced and the expense is recognized.

Prepaid Accounts (Also Called Prepaid Expenses) Are Generally