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why Prepaid Expense is treated as an asset & what will be
its journal entry using golden rules of accounting.
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Answer Posted / h.r. sreepada bhagi
Amount paid in advance in an accounting period for a service
to be received in a future accounting period is Prepaid
Advance. Since payee owes money or moneys worth (service) as
on the date of Balance Sheet at the end of that accounting
period, it's an asset.
When payment is made for future expense in advance the
entry is to :-
Debit Prepaid Expenses A/c, and
Credit Bank or Cash A/c.
In the future accounting period to which the expenses
relates, the entry will be :-
Debit Expenses A/c, and
Credit Prepaid Expenses A/c.
| Is This Answer Correct ? | 7 Yes | 2 No |
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discuss seperate determination concept
From the following particulars taken on 31 December, 1995, you are required to prepare a bank reconciliation statement to reconcile the bank balance shown in the Cash Book with that shown in the Pass Book: (i) Balance as per Pass Book on 31 December, 1995, O/D Rs 1,027. (ii) Four cheques drawn on 31 December but not cleared till January are as follows: Rs 12; Rs 1,021; Rs 98; and Rs 113. (iii) Interest on O/D not entered in Cash Book Rs 51. (iv) Three cheques received on 30 December and entered in the bank column of the Cash Book but not lodged in bank for collection till 3 January next: Rs 1,160; Rs 2,100; and Rs 2,080. (v) Cost of cheque book, Pass Book, etc; Rs 1.50 entered twice erroneously in Cash Book in November. (vi) A Bill Receivable for Rs 250 due on 29 December, 1995 was passed to the bank for collection on 28 December, 1990 and was entered in Cash Book forthwith whereas the proceeds were credited in the Pass Book only in January following. (vii) Chamber of Commerce subscription Rs 10 paid by bank on 1 December, 1990 had not been entered in the Cash Book. (viii) Bank charges of Rs 5 had been debited in the pass book twice erroneously. . . . plz be fast
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