An Asset Created by Prepayment of an Expense Is

question 78

Multiple Choice

An asset created by prepayment of an expense is:

• A) Recorded as a debit to an unearned revenue account.
• B) Recorded as a debit to a prepaid expense account.
• C) Recorded as a credit to an unearned revenue account.
• D) Recorded as a credit to a prepaid expense account.
• E) Not recorded in the accounting records until the earnings process is complete.

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Definitions:

Easement

A legal right to use another's land for a specific limited purpose.

Adverse Possession

A legal principle allowing a person to claim ownership of land or property owned by another if they openly occupy and use it for a certain period.

Profit

The financial gain obtained when the amount earned from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.

Consideration

An item of worth provided by each party involved in a contract, motivating them to agree to swap obligations reciprocally.