Multiple choice

Prepaid salary has a

  1. credit balance

  2. debit balance

  3. negative balance

  4. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Prepaid salary is an advance payment made to employees before the salary is actually earned. Like all prepaid expenses, it represents an asset for the company since the benefit (work performed) will be received in the future. Assets always carry a debit balance, which is why prepaid salary has a debit balance. Credit balance would indicate a liability, not an asset.

Keep practicing — related questions