If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future
A liability-revenue account relationship exists with an unearned rent revenue adjusting entry
Unearned revenue is a prepayment that requires an adjusting entry when services are performed
The adjusting entry at the end of the period to record an expired cost may be different depending on whether the cost was initially recorded as an asset or expense
UNDER ORIGINAL METHOD Revenue received before it is earned and expenses paid before being used or consumed are both initially recorded as liabilities
UNDER ORIGINAL METHOD An adjusting entry always requires an Income Statement account and a Balance Sheet account
UNDER ORIGINAL METHOD Asset prepayments become expenses when they expire
UNDER ALTERNATE METHOD Revenue received before it is earned and expenses paid before being used or consumed are both initially recorded as liabilities
UNDER ALTERNATE METHOD An adjusting entry always involved an Income Statement account and a Balance Sheet Account
Asset prepayments become expenses when they expire
