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On March 31. 2013, Prepaid Expenses A/c (2012 – 13) Shows a closing balance of Rs. 5,000. It means
- a)Expenses transferred from previous year for accounting in current year.
- b)Expenses transferred to next year for accounting in that or future years.
- c)Expenses transferred to next year for accounting in that year only
- d)Expenses to be transferred to profit & loss A/c of current year.
Correct answer is option 'A'. Can you explain this answer?
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On March 31. 2013, Prepaid Expenses A/c (2012 – 13)Shows a closi...
On March 31, 2013, the Prepaid Expenses account for the year 2012 would be adjusted.
Prepaid expenses are expenses that have been paid for in advance but have not yet been used or consumed. These expenses are initially recorded as an asset on the balance sheet and are gradually recognized as expenses over time.
To adjust the Prepaid Expenses account for the year 2012 on March 31, 2013, you would do the following:
1. Determine the original amount of prepaid expenses for the year 2012. This can be obtained from the records of the company.
2. Calculate the amount of prepaid expenses that have been used or consumed during the year 2012. This can be done by reviewing the expenses incurred during the year and identifying those that were prepaid.
3. Subtract the amount of prepaid expenses used or consumed during the year 2012 from the original amount of prepaid expenses. This will give you the adjusted balance for the year.
4. Record the adjustment in the Prepaid Expenses account by debiting the account for the amount of prepaid expenses used or consumed and crediting the account for the adjusted balance.
For example, if the original amount of prepaid expenses for the year 2012 was $10,000 and $6,000 of expenses were used or consumed during the year, the adjustment would be recorded as follows:
Debit Prepaid Expenses account: $6,000
Credit Prepaid Expenses account: $4,000
This adjustment reflects the portion of prepaid expenses that have been used or consumed during the year 2012, leaving a remaining balance of $4,000 that will be carried forward to the next accounting period.
Prepaid expenses are expenses that have been paid for in advance but have not yet been used or consumed. These expenses are initially recorded as an asset on the balance sheet and are gradually recognized as expenses over time.
To adjust the Prepaid Expenses account for the year 2012 on March 31, 2013, you would do the following:
1. Determine the original amount of prepaid expenses for the year 2012. This can be obtained from the records of the company.
2. Calculate the amount of prepaid expenses that have been used or consumed during the year 2012. This can be done by reviewing the expenses incurred during the year and identifying those that were prepaid.
3. Subtract the amount of prepaid expenses used or consumed during the year 2012 from the original amount of prepaid expenses. This will give you the adjusted balance for the year.
4. Record the adjustment in the Prepaid Expenses account by debiting the account for the amount of prepaid expenses used or consumed and crediting the account for the adjusted balance.
For example, if the original amount of prepaid expenses for the year 2012 was $10,000 and $6,000 of expenses were used or consumed during the year, the adjustment would be recorded as follows:
Debit Prepaid Expenses account: $6,000
Credit Prepaid Expenses account: $4,000
This adjustment reflects the portion of prepaid expenses that have been used or consumed during the year 2012, leaving a remaining balance of $4,000 that will be carried forward to the next accounting period.
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On March 31. 2013, Prepaid Expenses A/c (2012 – 13)Shows a closing balance of Rs. 5,000. It meansa)Expenses transferred from previous year for accounting in current year.b)Expenses transferred to next year for accounting in that or future years.c)Expenses transferred to next year for accounting in that year onlyd)Expenses to be transferred to profit & loss A/c of current year.Correct answer is option 'A'. Can you explain this answer?
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