Question

Adjustments for prepaid expenses: Select one: a. decrease assets and increase revenues. b. decrease expenses and increase assets. c. decrease assets and increase expenses. d. decrease revenues and increase assets.

Answer 1

c. decrease assets and increase expenses

Step-by-step explanation:

Prepaid expenses are expenses that are recorded in the accounts in the current period, because a purchase invoice has been received or a payment has been made, but all or part of the expense relates to a future accounting period.

Prepaid expenses occur whenever payments are made in advance for an expense item.

For adjusting prepaid expenses, the following adjustment shall be made in the accounts

Decease prepaid expenses increase expenses

Based on the above discussion, answer shall be:

c. decrease assets and increase expenses