PRC-1 · Chapter 4 · Question 17 of 100
If the closing balance of a prepaid expense account is higher than its opening balance from the previous year, this mathematically indicates that:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The cash payment made during the year exceeds the expense incurred for the year.
Explanation
A higher closing prepaid balance means the amount of cash paid in advance has grown, indicating that payments made during the year were greater than the portion of the expense that actually expired and was charged to profit or loss.
More Accruals and Prepayments MCQs
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