In the case of a prepaid expense, the adjusting entry required at the end of a period will consist of a debit to the Prepaid Expense account. Assume the prepaid expense was initially recorded as an asset.

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The adjusting entry for a prepaid expense initially recorded as an asset involves a debit to the Expense account and a credit to the Prepaid Expense account to recognize the expense incurred during the period.

In the Case of a Prepaid Expense, the Adjusting Entry