The Alternative Method of Accounting for Prepayments

question 85

Multiple Choice

The alternative method of accounting for prepayments

• A)Initially records all prepaid expenses with debits to expense accounts.
• B)Initially records all prepaid expenses with credits to expense accounts.
• C)Requires an adjusting entry because expenses are understated.
• D)Requires an adjusting entry if the prepaid is consumed during the period.
• E)Requires an adjusting entry because net income is understated.

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Definitions:

Distributorship

An arrangement between a manufacturer and a distributor in which the distributor sells or distributes the manufacturer's products to retailers or directly to consumers.

World Trade Organization

An international organization dealing with the global rules of trade between nations, aiming to ensure that trade flows as smoothly, predictably, and freely as possible.

National Treatment

A principle in international law where a country treats products and companies from other nations no less favorably than its own.

Statute of the International Court of Justice

The foundational treaty that established the International Court of Justice as the principal judicial organ of the United Nations, outlining its functions and procedures.