Question

Prepaid wages Rs. 2,500 appear in A's Trial Balance. These will appear in:

• A. Trading Account
• B. Profit & Loss Account
• C. Balance Sheet
• D. Manufacturing Account

Hint:

Prepaid expenses are always shown as current assets in the Balance Sheet.

Answer 1

The Correct Option is C

Step 1: Understanding Prepaid Wages.
Prepaid wages are the expenses which have been paid in advance for the next accounting period. These are not current expenses but future benefits.
Step 2: Position in Financial Statements.
Prepaid wages are shown as an asset in the Balance Sheet because they represent payments made in advance which will give benefit in the future.
Step 3: Analyzing the Options.
(A) Trading Account – Incorrect, as prepaid wages are not a trading expense for the current year.
(B) Profit & Loss Account – Incorrect, they are not current expenses.
(C) Balance Sheet – Correct, shown under Current Assets.
(D) Manufacturing Account – Incorrect, since not related to manufacturing cost.
Step 4: Conclusion.
Hence, prepaid wages are shown in the Balance Sheet.