Use the following information to answer this questions. Rent prepaid - 1/01/2014 - N600 Rent paid - 31/12/2014 - N3,000 Rent prepaid - 31/12/2014 - N400. The balance sheet as at 31st December 2014 will show
A. Current asset of N600 B. Current asset of N400 C. Current liability of N400 D. Current asset of N600
Correct Answer: B
Explanation
Prepaid expenses are future expenses that have been paid in advance. In other words, prepaid expenses are costs that have been paid but are not yet used up or have not yet expired. N400 is the only future expense that would still be viable at the end of the accounting year. The N400 represents current assets which are expected to be used or converted to cash within the year.
