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Export on expired finale trial11/28/2023 There are two ways of recording prepayments: (1) the asset method, and (2) the expense method. The adjusting entry for prepaid expense depends upon the journal entry made when it was initially recorded. Prepaid expenses may need to be adjusted at the end of the accounting period. Rather, they are classified as current assets, readily available for use when the company needs them. Expenses are considered incurred when they are used, consumed, utilized or has expired.īecause prepayments they are not yet incurred, they should not be classified as expenses. Expenses are recognized when they are incurred regardless of when paid.
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