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A Limited closes the books of accounts each month. On May 1st, the AP team of A Limited received an invoice from Vendor ABC
A Limited closes the books of accounts each month. On May 1st, the AP team of A Limited received an invoice from Vendor ABC for $45k. The period of service on this invoice is Apr 1st to Dec31st. The AP analyst believes that the entire amount paid should be treated as follows 1) Record the entire amount paid as Prepaid and 2) Expense of $5k each month starting April-22. He also proposed a rectification entry for April-22 i.e Expense Dr To Prepaid (Being expense recorded) Do you agree with the above treatment? Analyze the impact of the above on the Balance sheet and Income Statement.
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