Question

The justification for a company initially recording prepaid rent in either an income statement or balance sheet account is that:_____.

Answer 1

The justification for a company initially recording prepaid rent in either an income statement or balance sheet account is that at the end of each year, the account balances are revised so that they accurately represent the current situation.

This is further explained below.

What is an income statement?

Generally, When a business first records its prepaid rent, it should do so in either an account on its income statement or one on its balance sheet.

The reason for this is because, at the end of each year, the balances of these accounts should be revised so that they more accurately reflect the situation at the moment.

In conclusion, An income statement, also known as a profit and loss account, is one of the financial statements that a business maintains.

It details the revenues and costs that the firm incurred during a certain time period. It describes the process through which the revenues are converted into the company's income or profit after taxes.

Read more about income statements,

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