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WAEC Financial Accounting 1996 Question 5

Question 5

Accruals and Prepayments

Prepayment is shown in the Balance Sheet as

  1. A.Current asset
  2. B.Liability
  3. C.Capital
  4. D.Fixed asset
  5. E.Investment
Show the answer and explanation

Answer: A (Current asset)

Explanation

A prepayment is an expense paid in advance; the business is owed that service, so it is a current asset.