As prepaid expenses expire with the passage of time the correct adjustment will be a(n):

Question

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Prepaid expenses represent payments made in advance for goods or services that will be used in the future. As time passes and these goods or services are used, the prepaid expense becomes an expense that is recognized on the income statement. Therefore, the correct adjustment is to increase an expense account (to recognize the expense) and decrease an asset account (to reflect the use of the prepaid item).

As Prepaid Expenses Expire with the Passage of Time the Correct