As prepaid expenses expire with the passage of time, the correct adjusting entry will be: Group of answer choices Debit an asset account; Credit an expense account. Debit an expense account; Credit an asset account. Debit an asset account; Credit an asset account. Debit an expense account; Credit an expense account.
Question
As prepaid expenses expire with the passage of time, the correct adjusting entry will be: Group of answer choices
Debit an asset account; Credit an expense account.
Debit an expense account; Credit an asset account.
Debit an asset account; Credit an asset account.
Debit an expense account; Credit an expense account.
Solution
As prepaid expenses expire with the passage of time:
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An expense account should be debited. This is because as the prepaid expense expires, it becomes an actual expense that needs to be recorded in the current accounting period.
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An asset account should be credited. This is because the prepaid expense is initially recorded as an asset. As it expires, the asset's value decreases, so the asset account needs to be reduced.
Therefore, the correct adjusting entry will be: Debit an expense account; Credit an asset account.
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