BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Adjusting entry for reporting corrected prepaid expenses is debiting the expense account and crediting the asset account. As prepaid expenses are current assets, therefore, an asset account named prepaid expense is created. On actual utilization of the services, this account is credited.

Detailed explanation-2: -Generally, the amount of prepaid expenses that will be used up within one year are reported on a company’s balance sheet as a current asset. As the amount expires, the current asset is reduced and the amount of the reduction is reported as an expense on the income statement.

Detailed explanation-3: -Adjustments for prepaid expenses As you use the prepaid item, decrease your Prepaid Expense account and increase your actual Expense account. To do this, debit your Expense account and credit your Prepaid Expense account. This creates a prepaid expense adjusting entry.

Detailed explanation-4: -Answer and Explanation: As prepaid expenses expire with the passage of time, the correct adjusting entry will be a) a debit to an expense account and a credit to an asset account..

Detailed explanation-5: -Typically, Prepaid Expenses which will expire within one year from the balance sheet date are listed in the current assets section of the Balance Sheet. As the prepaid expense expires in a given accounting period, accountants record a journal entry for the expiration as an expense.