Question

Recording the purchase of supplies in a prepaid account would be an example of a(n): O A. deferred expense. OB. deferred revenue. O c. accrued expense. O D. accrued revenue.

Answer 1

Recording of purchase of supplies in a prepaid account would be an example of a (A) DEFERRED EXPENSE.

We have purchased the supplies and debited the prepaid expense account and same is transferred to expense account on the basis of actual consumption. Hence we are deferring the expenses.

Reasons for other options being incorrect:

Option B: Purchase of supplies is an expense hence it has nothing to do with revenue.

Option C: Accrued expenses are those expenses which has been incurred by the company however, payment has not been . but in this case payment has been made and cost is yet to incur.

Option D: Accrued revenue are those revenue which has been earned by the company. Purchase of supplies has no link with such accrued revenue.

*Please give your valuable feedback.