[jlwillpass]

Could someone please help explain/rationalize the scenario below?

GL prepaid account balance went from 70K last month to 60K this month. Accounting department does a J/E, Crediting Prepaid for 10K, and Debiting a Liability account for 10K.

the Credit part makes sense, but why debit liability account? Shouldn’t the debit be to expense?

Thanks!

[mla1169]

Only scenario I can think of is the J/E was correcting a mistake and the amount didn't belong in prepaid.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[Author]

Replies