Question

Prepaid Rent and Unearned Service Revenue are examples of accounts that do not need to be adjusted at the end of the accounting period.

A) True

B) False

Answer 1

B) False

In Accounting, there are some accounts that are need to be adjusted to comply with accounting framework.

Prepaid Rent and Unearned Revenues are that accounts which are adjusted at year end to reflect correct books of accounts.

Prepaid rent means amount paid in advance for upcoming period. So when period covered for rent has been passed , respective rent expenses recognised.

In same way, unearned revenue refers to that amount which are recived in advance for upcoming revenue and when service for which amount received in advance is performed such revenue are recorded.

So such types of year end adjustments are made in the books and Prepaid rent and Unearned Revenue are part of that.