Multiple choice

Prepaid expenses are shown

  1. by way of addition in the income statement

  2. as a current asset

  3. as a fixed asset

  4. as a current liability

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Prepaid expenses represent payments made in advance for future benefits (like prepaid insurance or rent). Since they will be consumed within one year, they are classified as current assets on the balance sheet, not as fixed assets or liabilities.