Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Introduction to Adjusting Journal Entries and Prepaid Expenses

Financial Accounting

3. Accrual Accounting Concepts

Introduction to Adjusting Journal Entries and Prepaid Expenses

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Multiple Choice

Which of the following is the correct process to enter an adjusting journal entry for prepaid expenses in QuickBooks Online (QBO)?

Go to the 'Sales' menu, select 'Invoices', and create a new invoice for the adjustment.

Go to the 'Banking' menu, select 'Bank Feeds', and match the transaction to an existing expense.

Go to the 'Accounting' menu, select 'Chart of Accounts', choose the appropriate account, and click 'Journal Entry' to record the adjustment.

Go to the 'Reports' menu, select 'Profit and Loss', and edit the report to include the adjustment.

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Verified step by step guidance

Step 1: Understand the concept of prepaid expenses. Prepaid expenses are payments made in advance for goods or services to be received in the future. These are recorded as assets initially and adjusted periodically to reflect the expense incurred over time.

Step 2: Recognize the need for an adjusting journal entry. Adjusting entries are made to ensure that the financial statements reflect the correct amounts for the period. For prepaid expenses, this involves transferring the appropriate portion from the asset account to the expense account.

Step 3: Navigate to the 'Accounting' menu in QuickBooks Online (QBO). This menu is where you manage accounts and record journal entries.

Step 4: Select 'Chart of Accounts' and locate the account associated with the prepaid expense. This account will typically be listed under assets.

Step 5: Click 'Journal Entry' to record the adjustment. In the journal entry, debit the appropriate expense account to reflect the incurred expense and credit the prepaid expense account to reduce the asset balance.