The adjusting entry for a prepaid expense has the effect of reducing total assets and reducing net income.

Question

Quizplus · Accepted Answer

The adjusting entry for a prepaid expense involves recognizing the portion of the expense that has been used up or expired during the accounting period. This results in a decrease in the asset account (prepaid expense) and a decrease in net income, as the expense is now recognized as an operating expense.

The Adjusting Entry for a Prepaid Expense Has the Effect