When the indirect method is used,if a prepaid expense account decreases during the accounting period,the change in the prepaid expense account is:
A) added to the change in the cash account.
B) subtracted from net income.
C) added to net income.
D) subtracted from the change in the cash account.

Question

Quizplus · Accepted Answer

When a prepaid expense account decreases, it means that the expense has been recognized, reducing the prepaid asset. In the indirect method, this decrease is added back to net income to adjust for the non-cash expense recognition.

When the Indirect Method Is Used,if a Prepaid Expense Account