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a. Prepaid expense b. Accrued expense c. Prepaid revenue d. Expired cost
A. This entry is an adjusting entry to recognize prepaid expense and to reflect the correct salary expense for the period.
The original entry made in recording the transaction (using expense method):
Dr Salary Expense
Cr Cash
To recognized the prepaid salary expense and to correct the amount of salary expense for the period, we make an adjusting entry:
Dr Prepaid Expense
Cr Salary Expense
A prepaid expense is a type of asset on the balance sheet that results from a business making advanced payments for goods or services to be received in the future. Prepaid expenses are initially recorded as assets, but their value is expensed over time onto the income statement. Unlike conventional expenses, the business will receive something of value from the prepaid expense over the course of several accounting periods.
1ST ENTRY
Dr Salary Expense
Cr Cash
2ND ENTRY
Dr Prepaid Expenses
Cr Salary Expense
FINAL ENTRY
Dr PE
Cr Cash
(d)
