Question

What will be the treatment of prepaid expenses if adjustment of it is appearing outside the trial Balance?

• A. Prepaid Expenses account will be debited and respective expenses account will be credited
• B. Respective expense account will be debited and prepaid expenses account will be credited
• C. Prepaid expenses account will be debited and profit and loss account will be credited
• D. Profit and loss account will be debited and prepaid expenses account will be credited

Answer 1

The correct option is A Prepaid Expenses account will be debited and respective expenses account will be credited

Prepaid expenses are deducted from the respective accounts in trading and P & L A/c and shown in asset side in the balance sheet.