Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 10 - No. 36)
What is the impact of a prepaid expense on the financial position?
Decrease in assets and an increase in equity.
Increase in assets and a decrease in liabilities.
Decrease in assets and a decrease in liabilities.
Increase in assets and an increase in liabilities.
Explanation
A prepaid expense increases an asset (prepaid expense) while decreasing liabilities or cash.
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