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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.
Options
assets
liability
debit
credit
Solution
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.
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RELATED QUESTIONS
Pre-paid expenses are shown on the ....................... side of balance sheet.
- Assets
- Liability
- Debit
- Cash
Give the word / term or phrase which can substitute the following statement.
Expenses which are paid before due.
State whether the following statement is True or False.
Prepaid expenses are shown on the asset side of the Balance Sheet.
State the meaning of Prepaid expenses
Show the treatment of prepaid expenses depreciation, closing stock at the time of preparation of final accounts when:
(a) When given inside the trial balance?
(b) When given outside the trial balance?
