Postage Stamps On Hand Are Classified As What? (Multiple Choice Question)

Postage Stamps On Hand (Unused) Are Classified As:

The correct Answer of this MCQ is (d) "A Prepaid Expense".

Reason: Because, the business has not yet utilized the postage stamps (these are purchased by the company from post office) in office works but the payment made in advance to the post office i.e., in purchasing postage stamps (Prepaid Expenses). These are shown on the left side or assets side of balance sheet as Current Assets as these probable future economic benefits within a year.

Used postage stamps are expensed out (charged to income statement during the accounting period) and no longer be treated as an asset on balance sheet.