Accounting Mcqs

Q.  The adjustment to be made for prepaid expenses is____________?

a. Add prepaid expenses to respective expenses and show it as an asset
b. Deduct prepaid expenses from respective expenses and show it as an asset
c. Add prepaid expenses to respective expenses and show it as a liability
d. Deduct prepaid expenses from respective expenses and show it as a liability


ANSWER: See Answer
 
Prepaid expense is an expense relating to the next accounting period but has been paid in the current accounting period and hence it is a current asset. The adjustment would be to
deduct it from the respective expense account in the P&L A/c and show it as a current asset in the Balance Sheet.
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