The Alternative Method of Accounting for Prepayments

Multiple Choice

The alternative method of accounting for prepayments

A) Initially records all prepaid expenses with debits to expense accounts.
B) Initially records all prepaid expenses with credits to expense accounts.
C) Requires an adjusting entry because expenses are understated.
D) Requires an adjusting entry if the prepaid is consumed during the period.
E) Requires an adjusting entry because net income is understated.