Question

Select the most appropriate alternative from those given below and rewrite the statement.

Prepaid expenses are shown on the __________________ side of the balance sheet.
a) assets
b) liability
c) debit
d) credit

Answer 1

Prepaid expenses are shown on the assets side of the balance sheet.

Explanation: Prepaid expenses are those expenses that have been paid in advance for the next year in the current year itself. The benefit of such payments will be availed in the next accounting year. Thus, they become an asset of the business and, therefore, are shown on the Assets side of the Balance Sheet.