Question

State whether the following statement is True or False.

Prepaid expenses are shown on the asset side of the Balance Sheet.

Options

• True

• False

Answer 1

True

Explanation: Those expenses that have been paid in advance for the next year in the current year itself are known as prepaid expenses. The benefit of such payments will be availed in the next accounting year. So, these expenses are a kind of asset for the firm; therefore, they are shown on the Assets side of the Balance Sheet.