PRC-1 · Chapter 4 · Question 63 of 100
If a business initially records all payments for insurance as an expense, what is the required adjusting entry to recognize the unexpired portion at year-end?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Debit Prepaid Expenses, Credit Expense Account
Explanation
The adjusting entry moves the unexpired portion out of the expense account (Credit Expense Account to reduce it) and into an asset account (Debit Prepaid Expenses).
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