Accounting for IGCSE & O level - Preparation Of Financial Statements (Section 13 - No. 40)
What is the effect on the financial statements when adjusting for a prepaid expense?
Increases assets and increases expenses.
Decreases assets and increases expenses.
Increases assets and increases liabilities.
Decreases assets and decreases liabilities.
Explanation
As the prepaid expense is used, the expense increases in the income statement and the asset on the balance sheet decreases.
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