Question

Select the statement below that best defines prepaid accounts. Multiple choice question. Prepaid accounts reflect a company's cash balance and include currency, coins and money orders. Prepaid accounts are liabilities that are due within a specified time period. Prepaid accounts are expenses and are increased with a credit. Prepaid accounts are assets that represent prepayments of future expenses.

Answer 1

The statement related to the prepaid account " It is the asset that shows advance payment for the future expense" is correct.

The information related to the prepaid account is as follows:

• It is the account that shows in the current asset side of the balance sheet.
• It is an advance payment for future expenses.
• It contains the normal debit balance.
• Neither it is a liability nor an expense account.

Therefore we can conclude that The statement related to the prepaid account " It is the asset that shows advance payment for the future expense" is correct.

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