The reason for recording a prepaid expense as a current asset is:
A)that the prepaid item will be returned for a cash refund.
B)that the prepaid item has not yet become an expense.
C)that the expense has been incurred but not yet paid.
D)to avoid recognizing an expense so net income will be higher for the current accounting period.

Question

Quizplus · Accepted Answer

Prepaid expenses are recorded as current assets because they represent payments made for expenses that will benefit future periods, and thus have not yet become expenses.

The Reason for Recording a Prepaid Expense as a Current