An expense is paid for, but the goods and services have not yet been received or consumed by the end of the accounting period. Which adjustment should the business process?
Understand the Problem
The question is asking which accounting adjustment should be made when an expense has been paid for but the corresponding goods or services have not yet been received by the end of the accounting period.
Answer
Prepaid expense
The final answer is Prepaid expense
Answer for screen readers
The final answer is Prepaid expense
More Information
A prepaid expense occurs when a business pays for a service or good in advance of receiving it. It is initially recorded as an asset and then expensed as the service or goods are consumed.
Tips
Avoid confusing prepaid expenses with accrued expenses, which are incurred but not yet paid.
Sources
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