Question

Type 1 adjusting entries -- prepayment for assets that will be used in a later accounting period Give the pattern (i.e., what is debited? what is credited?) of the original entry. Give the pattern of the adjusting entry.

Answer 1

The original entry for prepayments for assets that will be used in a later accounting period involves debiting the asset and crediting a liability or cash account. The adjusting entry for such prepayments involves decreasing the asset account and increasing the expense account for the portion related to the current accounting period.

Step-by-step explanation:

When recording prepayments for assets that will be used in a later accounting period, the original entry follows a specific pattern.he asset is debited, representing an increase in the asset's value, while a liability or cash account is credited, representing a decrease in either a money owed or cash on hand.

For example, if a company prepays rent for the next month, the rent expense would be debited, and the cash account would be credited in the original entry.

The adjusting entry pattern for prepayments is to decrease the asset account for the amount of the prepayment, and increase the expense account for the portion of the prepayment that belongs to the current accounting period.

Using the same example of prepaying rent for the next month, the adjusting entry would decrease the prepaid rent account and increase the rent expense account in the current accounting period.