PRC-1 · Chapter 4 · Question 8 of 100
When an adjusting entry is successfully made to recognize a prepaid expense at year-end, what is the specific impact on the financial elements?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Decrease in expense and increase in current asset
Explanation
Recognizing a prepaid expense involves shifting an already recorded expense to an asset account. This decreases the overall expense for the period and increases current assets.
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