Final answer:
An example of an adjusting entry in the QBO journal for a prepaid item involves recognizing the expense and reducing the prepaid asset amount by debiting the expense account and crediting the prepaid asset account.
Step-by-step explanation:
An example of an adjusting entry for a prepaid item in the QuickBooks Online (QBO) journal would involve the recognition of the expense and the reduction of the prepaid asset amount. Let's say we have a prepaid item with a monthly cost of $60. In the journal, we would debit the expense account (e.g., Rent expense) by $60 and credit the prepaid asset account (e.g., Prepaid rent) by $60.
This entry recognizes the portion of the prepaid item that has been used up as an expense and reduces the remaining balance of the prepaid asset. These adjusting entries help ensure accurate financial reporting by matching expenses with the periods they are incurred.
Overall, understanding how to make adjusting entries for prepaid items in the QBO journal is important for maintaining accurate financial records and following the Generally Accepted Accounting Principles (GAAP).