Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 37 - No. 49)
What is the main purpose of an adjusting entry for prepaid expenses?
To record the cash payment.
To allocate the cost of the expense over the periods benefited.
To increase the company's cash balance.
To eliminate the need for future payments.
Explanation
The purpose is to match the expense to the period it is incurred.
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