Prepaid expenses are: incurred and already paid or recorded. O paid and recorded in an asset...

Question

Question

Prepaid expenses are: incurred and already paid or recorded. O paid and recorded in an asset account after they are used or c

Answer 1

Answer #1

Prepaid expenses are paid and recorded in an asset account before they are used or consumed.

Fourth option is correct.

Prepaid expenses are expenses that have been paid in advance, benefit of which will be used in future.

When Prepaid expenses are paid, an asset is created for short term. Thus, Prepaid expenses are debited and cash is credited at the time of payment.

When Prepaid expenses are used in future, relevant expense account is debited and Prepaid expense account is credited.

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Answer 2

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