For prepaid expense adjusting entries,

Question

Quizplus · Accepted Answer

Prepaid expenses are assets that have been paid for in advance and are expected to provide future economic benefits. Prior to adjustment, expenses are understated because the cost of the prepaid expense has not yet been recognized as an expense, and assets are overstated because the full value of the expense has been recorded as an asset. The adjusting entry to recognize the expense involves debiting the expense account (to increase the expense) and crediting the asset account (to decrease the value of the asset). Therefore, choice C is the correct answer.

For Prepaid Expense Adjusting Entries