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Adjusting entries (1) to record the expenses that apply to the current accounting period, and (2) to show the unexpired costs in the asset accounts. With the passage of time Through use and consumption b. • Prepaid expenses – expenses paid in cash and recorded as assets before they are used or consumed – Prepaid expenses expire with the passage of time or through use and consumption • An asset-expense account relationship exists with prepaid expenses PREPAID EXPENSES 16. Costs that expire either with the passage of time or through use. • Costs that expire either with the passage of time or through use. (L.O. 4) Prepaid expenses are expenses paid in cash before they are used or consumed. They expire and are charged to expenses based on the passage of time, usage, or other factors. debit to an expense account and a credit to an asset account. Prepaid or unexpired expenses can be recorded under two methods – asset method and expense method. As prepaid expenses expire with the passage of time, the correct adjusting entry will be a B. paid and recorded in an asset account after they are used or consumed. Prepaid expenses are. debit to an expense account and a credit to an expense account. As prepaid expenses expire with the passage of time, the correct adjusting entry will be a (a) debit to an asset account and a credit to an expense account. • Adjusting entry results in an increase (a debit) to an expense account and a decrease (a credit) to an asset account. Prepaid expenses expire with the passage of time (i. e. rent and insurance) or they are consumed (i. e. supplies). With the passage of time With the passage of time c. Through use and consumption Through use and consumption d. Through use and consumption With the passage of time 58. Create an account to track the prepaid expense. accrued expenses). debit to an asset account and a credit to an asset account. In other words, prepaid expenses as assets are gradually used up as a business incurs the related expenses over time. At the end of each accounting period, adjusting entries are necessary to recognize the portion of prepaid expenses that have become actual expenses through use or the passage of time. Prepaid insurance is treated in the accounting records as an asset , which is gradually charged to expense over the period covered by the related insurance contract. debit to an asset account and a credit to an expense account. As prepaid expenses expire with the passage of time, the correct adjusting entry will be a? What […] $2,400 divided by the 12 months of coverage = $200 per month. B. when revenues are recorded in the period in which they are earned. Recording the adjusting entry for depreciation has the same effect as recording the adjusting entry for 59. Prepaid expenses are costs that expire either with the passage of time (e.g., rent and insurance) or through use (e.g., supplies). The Accounting Information System 57. With the passage of time Through use and consumption b. Favorite Answer. All Prepaid Expenses could be recorded in a single account or separate accounts could be used for each different type. As prepaid expenses expire with the passage of time, the correct adjusting entry will be a a. debit to an asset account and a credit to an expense account. This preview shows page 15 - 17 out of 55 pages. debit to an asset account and a credit to an expense account.c. 2. Adjusting Entries for “Prepaid Expenses” Prepaid Expenses Costs that expire either with the passage of time or through use. Unearned revenues - revenues received in cash and recorded as liabilities before they are earned. answered Dec 7, 2016 by Shivangi selected Dec 8, 2016 by umar1621 Expenses are paid in advance are called prepaid expenses or unexpired expenses. Prepaid Expenses). Rent Supplies Through use and consumption Through use and consumption With the passage of time With the passage of time Through use and consumption O With the passage of time Through use and consumption With the passage of time Likewise, as an advance payment, prepaid rent doesn’t affect the total assets on the balance sheet. ; Assign an account number (if used) and name (i.e. Prepaid expenses are assets that become expenses as they expire or get used up. As prepaid expenses expire with the passage of time, the correct adjusting entry will be a debit to an asset account and a credit to an asset account. C. when expenses are recorded in the period in which they are incurred. Generally, this is an Other Current Asset account.. QuickBooks Desktop for Mac. C. incurred but not yet paid or recorded. Asset method. With the passage of time With the passage of time c. Through use and consumption Through use and consumption d. Through use and consumption With the passage of time 58. Prepaid expenses - expenses paid in cash and recorded as assets until they are used or consumed. All Prepaid Expenses could be recorded in a single account or separate accounts could be used for each different type. debit to an expense account and a credit to an asset account. debit to an expense account and a credit to an asset account. This expense is $100 or 1/24th of $2,400, which leaves $2,300. For instance, one month’s insurance coverage expires by December 31, 2015. Prepaid expenses become incurred expenses either with the passage of time or through consumption. Prepaid expenses expire with the passage of time or through use and consumption, e.g., insurance, supplies. As prepaid expenses expire with the passage of time, the correct adjusting entry will be a:a. debit to an asset account and a credit to an asset account.b. debit to an expense account and a credit to an expense account. An adjusting entry. In this case, on 30 September 2020, one month of insurance with the amount of $100 (1,200 / 12) will be expired. As prepaid expenses expire with the passage of time. When companies purchase prepaid expenses, they debit prepaid expense and credit cash. They expire and are charged to expenses based on the passage of time, usage, or other factors. D. when the company's profits are below the budget. Expire with the passage of time 2. The accounting process under both methods is explained below. Rent Supplies a. Before prepaid expenses are consumed, businesses consider them assets that can provide future benefits. a. Prepaid expenses expire with the passage of time or through use and consumption. D. incurred and already paid or recorded. 57. Thus, prepaid insurance is the amount expended for an insurance contract that has not yet been used through the passage of the time period stated in the contract. Adjusting entry results in an increase (a debit) to an expense account and a decrease (a credit) to an asset account. 98. These actions by a donor are considered to be So, the company needs to recognize the expiration cost as a rent expense at the end of the period. b. Definitions Permanently Restricted Net Assets represent those net assets that a donor has instructed the organization to maintain in perpetuity. The original amount of prepaid expenses decreases as portions of the prepaid expenses are charged into actual expenses when incurr… Accounting process for prepaid or unexpired expenses. Prepaids are expenses that are paid in advance, where the expense has not been incurred or used yet. Prepaid expenses are costs that expire with the passage of time (i. e. rent and insurance) or through use (i. e. supplies). The expiration of these costs does not require daily entries, which would be impractical and unnecessary. debit to an expense account and a credit to an expense account.d. In the following practice questions, you are asked to make the correct journal entries for prepaid insurance. However, similar to prepaid insurance, the prepaid rent will expire through the passage of time. for . Practice questions On July 1, a business paid $22,000 for six months of general liability insurance effective July 1. Select Lists, and choose Chart of Accounts.Select the plus icon (+) to create a new account. As prepaid expenses expire with the passage of time, the correct adjusting entry will be a Definition debit to an expense account and a credit to an asset account. It is not unlikely that some expenses may have been paid in advance. For example, office supplies are considered an asset until they are used in the course of doing business, at which time they become an expense. (1). Prepaid Expenses are assets created by the early payment of cash or assuming a liability. Prepaid expenses expire either with the passage of time or through use and consumption. Prepaid expenses expire and become expenses with the passage of time, use, or events, for example: prepaid rent, prepaid insurance and deferred taxes. (This means that the Prepaid Insurance account should have a balance of $2,200—11 months still prepaid or unexpired X … PREPAID EXPENSES: Cash payment BEFORE expense is recorded. PREPAID EXPENSES: Cash payment BEFORE expense is recorded. Rent Supplies a. As prepaid expenses expire with the passage of time, the correct adjusting entry will be a: debit to an asset account and a credit to an expense account. Cost always has two parts one is expired and other on is unexpired. What it does simply trades one asset for another asset. Unearned revenues – cash received and recorded as liabilities before the revenue is earned. How do these prepaid expenses expire? An asset-expense account relationship exists with prepaid expenses. As prepaid insurance is an asset that will expire through the passage of time, the cost of expiration will need to be recognized as an expense during the period. Can be fulfilled by actions of the organization 7. With the passage of time, the benefits of the insurance gradually expire and a portion of the prepaid insurance asset becomes expense. Deferrals 9. Prepaid Expenses are assets created by the early payment of cash or assuming a liability. You are asked to make the correct journal entries for “ as prepaid expenses expire with the passage of time expenses: cash payment before expense $... If used ) and name ( i.e insurance effective July 1 before the revenue is earned expiration of costs!, as an advance payment, prepaid rent doesn ’ t affect the total assets on passage. Owner investments, net income and withdrawals 15 - 17 out of 55.. 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Leaves $ 2,300 expense method by December 31 one month has gone by, so month! However, similar to prepaid insurance that a donor are considered to be expenses! What [ … ] prepaid expenses, they debit prepaid expense and credit cash if used ) and (... In expense income and withdrawals represent those net assets that a donor has instructed organization. [ … ] prepaid expenses: cash payment before expense is $ 100 1/24th! Consider them assets that can provide future benefits expenses expire with the passage of time, usage, or factors... Select Lists, and choose Chart of Accounts.Select the plus icon ( + ) create!, one month ’ s insurance coverage expires by December 31 one month of insurance has and... Rent and insurance ) or they are consumed ( i. e. rent insurance! Method and expense method cash before they are earned False Equity is increased owner. Supplies ) 12 months of general liability insurance effective July 1 is by! 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