2)what is prepaid and how we will amortize the prepaidv

Question

Accepted Answer

Prepaid refers to an expense paid in advance, and it is amortized over the period it benefits.

Prepaid expenses are assets that represent future benefits paid in advance.
They are initially recorded as assets on the balance sheet.
Over time, the prepaid amount is gradually expensed through the process of amortization.
Amortization is the systematic allocation of the prepaid expense over its useful life.
The amortization period is determined based on the benefit period of the prepaid expense.
Common examples of prepaid expenses include prepaid rent, prepaid insurance, and prepaid subscriptions.
To amortize a prepaid expense, divide the total prepaid amount by the number of periods it benefits.
Each period, a portion of the prepaid expense is recognized as an expense on the income statement.
The remaining balance of the prepaid expense decreases until it is fully amortized.
Amortization of prepaid expenses ensures that expenses are recognized in the period they provide benefit.

Accepted Answer

Debit expenses
Credit prepaid account

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