When a company records the purchase of 1 month of prepaid expense the transaction does not affect the totals of assets or liabilities and owner's equity.

Question

Quizplus · Accepted Answer

Prepaid expenses are assets, and when a company records the purchase of 1 month of prepaid expense, the total assets increase. However, since the expense has not yet been incurred, the total liabilities and owner's equity remain unchanged.

When a Company Records the Purchase of 1 Month of Prepaid