The Adjusting Entry for a Prepaid Expense Always Includes a Debit

question 71

True/False

The adjusting entry for a prepaid expense always includes a debit to an expense account and a credit to a liability account.The credit is to an asset account.

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Definitions:

Implicit Costs

The opportunity costs of using resources owned by the firm for its own use, rather than earning income from these resources elsewhere.

Explicit Costs

Direct, out-of-pocket payments for inputs or resources employed in the production of goods or services.

Total Cost

The aggregate amount of expenses incurred by a business in producing goods or services, including both fixed and variable costs.

Economic Profit

The variance between gross receipts and all outlays, including both tangible and intangible costs.