Tag: outstanding expenses

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Multiple choice book keeping and accountancy adjustments in preparation of financial statements outstanding and prepaid expenses outstanding expenses need for adjustment, closing stock and outstanding expenses

What will be the treatment of prepaid expenses if adjustment of it is appearing outside the trial Balance?

  1. Prepaid Expenses account will be debited and respective expenses account will be credited

  2. Respective expense account will be debited and prepaid expenses account will be credited

  3. Prepaid expenses account will be debited and profit and loss account will be credited

  4. Profit and loss account will be debited and prepaid expenses account will be credited
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A Correct answer
Explanation

Prepaid expenses are deducted from the respective accounts in trading and P & L A/c and shown in asset side in the balance sheet.