All of the following are true regarding prepaid expenses except:
A)They are paid for in advance of receiving their benefits.
B)They are assets.
C)When they are used,their costs become expenses.
D)The adjusting entry for prepaid expenses increases expenses and decreases liabilities.
E)The adjusting entry for prepaid expenses increases expenses and decreases assets.

Question

Quizplus · Accepted Answer

The adjusting entry for prepaid expenses decreases assets and increases expenses, but does not affect liabilities. Therefore, option D is incorrect as it states that the adjusting entry decreases liabilities.

All of the Following Are True Regarding Prepaid Expenses Except