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

Prepaid accounts, also called prepaid expenses, are:

liabilities that represent amounts owed to suppliers for goods or services already received

expenses that have been incurred but not yet paid or recorded

assets that represent payments made in advance for goods or services to be received in the future

revenues earned but not yet received in cash or recorded

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Verified step by step guidance

Step 1: Understand the concept of prepaid accounts (prepaid expenses). These are payments made in advance for goods or services that will be received in the future. They are recorded as assets because they provide future economic benefits.

Step 2: Differentiate prepaid accounts from liabilities. Liabilities represent amounts owed to suppliers for goods or services already received, whereas prepaid accounts represent payments made in advance for future goods or services.

Step 3: Differentiate prepaid accounts from expenses. Expenses are costs incurred during a specific period, whereas prepaid accounts are payments made in advance and are not yet recognized as expenses until the goods or services are received.

Step 4: Differentiate prepaid accounts from revenues. Revenues are earnings from goods or services provided, whereas prepaid accounts are payments made in advance for goods or services to be received in the future.

Step 5: Conclude that prepaid accounts are classified as assets because they represent payments made in advance for goods or services that will provide future economic benefits.