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Question
When preparing the annual financial statements, the balance of prepaid rent account should be treated as a _____________.
When preparing the annual financial statements, the balance of prepaid rent account should be treated as a _____________.
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Solution
The correct option is A Personal account
Prepaid expenses are those expenses which have been paid in advance and related benefits are not consumed within the same accounting period. The benefits of expenses incurred are carried to the next accounting period. Examples-prepaid salary, prepaid rent etc. Prepaid expenses are recorded n the books at the end of an accounting period to show true numbers of a business. When preparing the annual financial statements, the balance of prepaid rent account should be treated as the balance of a personal account and is shown on the assets side of a balance sheet.
Prepaid expenses are those expenses which have been paid in advance and related benefits are not consumed within the same accounting period. The benefits of expenses incurred are carried to the next accounting period. Examples-prepaid salary, prepaid rent etc. Prepaid expenses are recorded n the books at the end of an accounting period to show true numbers of a business.
When preparing the annual financial statements, the balance of prepaid rent account should be treated as the balance of a personal account and is shown on the assets side of a balance sheet.
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