What is the effect of the adjusting entry for depreciation expense?
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What is the effect of the adjusting entry for depreciation expense?
Does the recording of an adjusting entry for depreciation have the same effect as recording an adjusting entry for an accured expense?
An accrued expense
A prepaid expense
A prepaid expense is an asset because you have not incurred the expense yet.
For example when you purchase insurance you record the purchase as a prepaid expense because you have not used the insurance yet. You have purchased the insurance to be used later.
As you use the insurance you will have to transfer a portion that is in prepaid expense to your expense account.
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