Question

"All of the following are true regarding prepaid expenses except: Multiple Choice They are paid for in advance of receiving their benefits. The adjusting entry for prepaid expenses increases expenses and decreases assets. When they are used, their costs become expenses. The adjusting entry for prepaid expenses increases expenses and decreases liabilities. They are assets."

Answer 1

The adjusting entry for prepaid expenses increases expenses and decreases liabilities.

Answer: Option 4.

Explanation:

Prepaid expenses are future costs that have been paid ahead of time. As it were, prepaid costs will be costs that have been paid yet are not yet spent or have not yet lapsed. As the sum lapses, the present resource is diminished and the measure of the decrease is accounted for as a cost on the pay proclamation.

Prepaid expenses are future costs that have been paid ahead of time. You can consider prepaid costs as costs that have been paid yet have not yet been spent or have not yet terminated. The measure of prepaid costs that have not yet lapsed are accounted for on an organization's monetary record as an asset.