Adjustment: Prepaid Expenses Video Lecture | SSC CGL Tier 2 - Study Material, Online Tests, Previous Year

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FAQs on Adjustment: Prepaid Expenses Video Lecture - SSC CGL Tier 2 - Study Material, Online Tests, Previous Year

1. What are prepaid expenses?
Ans. Prepaid expenses are costs that are paid in advance but are not immediately used or consumed. These expenses are recorded as assets on the balance sheet and are gradually recognized as expenses over time.
2. Why are prepaid expenses considered assets?
Ans. Prepaid expenses are considered assets because they represent future economic benefits for the company. These expenses have already been paid for and will be utilized or consumed in the future, contributing to the company's operations.
3. How are prepaid expenses recorded in accounting?
Ans. Prepaid expenses are typically recorded as an asset on the balance sheet under the current assets section. As the prepaid expenses are utilized or consumed, they are gradually recognized as expenses through the process of adjusting entries.
4. What is the purpose of adjusting prepaid expenses?
Ans. The purpose of adjusting prepaid expenses is to ensure that the expenses are recognized in the appropriate accounting period. This allows for accurate financial reporting and matching of expenses with the revenues generated in a specific period.
5. Can prepaid expenses be refunded or canceled?
Ans. In certain cases, prepaid expenses can be refunded or canceled. However, it depends on the terms and conditions of the specific prepaid expense. It is important to review the agreement or contract associated with the prepaid expense to determine if a refund or cancellation is possible.
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