[saif]

hello i had similar question before in audit exam

1- If record an asset purchase as an expense. what is Correcting entry?
i confused between answers which one is correct?
Dr. Fixed Asset
Cr. Expense
or
Dr. Fixed Asset
Cr. retain earning
so any correction should effect retain earning or not

2- what is correct JE if accountant record Prepaid expense as expense?
thank you

[saif]

any help guys??

[Larry]

Is this for current period or prior year purchase? I think there may be a difference.

If it was for current period. You can adjust the entry.

It would be:

DR: Fixed Asset
CR: Expense

I may be wrong but if it was for a prior year, then you would have to credit RE. Hopefully someone else chimes in.

As for the second question,

You need to reverse the entry for expense because the prepaid expense is an asset to the company until the liability comes due.

Is this question from a review program? (do not disclose exam questions)

REG - 82
FAR - 78
BEC - 76
AUD - 8/27/16

[saif]

thanks Papogator24 for respond

this was in Becker say correct JE just reverse it but doesn't give example
but when review FAR book in correct error i see it effect RE
that is why confused

[Author]

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