Which of the Following Reflect the Balances of Prepayment Accounts

question 229

Multiple Choice

Which of the following reflect the balances of prepayment accounts prior to adjustment?

• A) Statement of financial position accounts are understated and income statement accounts are understated.
• B) Statement of financial position accounts are overstated and income statement accounts are overstated.
• C) Statement of financial position accounts are overstated and income statement accounts are understated.
• D) Statement of financial position accounts are understated and income statement accounts are overstated.

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Definitions:

Operating Activities

Daily business functions and transactions related to a company's core business operations, such as sales, provision of services, and purchasing of raw materials.

Expenses

Costs incurred in the process of earning revenue, including operational costs, utilities, salaries, and rent.

Investing Activities

Transactions involving the purchase and sale of long-term assets and other investments, included in a company's cash flow statement.

Statement of Cash Flows

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents.