Adjusting Entries for Prepaid Expenses (Financial Accounting Tutorial #20)

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In this financial accounting tutorial we cover adjusting entries for prepaid expenses like insurance policies or rent leases paid in advance. To create the adjustment we must figure out what amount one month of rent expense is and journalize it by debiting rent expense and crediting prepaid expense (an asset). Remember that adjusting entries do not involve cash and that the adjustment that the business will record will either be a revenue or expense adjusting entry!


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