How would a payment for rent paid in advance be classified? Multiple Choice Claims exchange transaction Asset use transaction As

Question

3 years ago

11

set source transaction Asset exchange transaction

1 answer:

kvv77 [185] · Answer 1 · 2021-12-13T21:22:51+03:00

Answer:

Asset exchange transaction

Explanation:

Prepaid rent is an asset exchange transaction because cash (asset) is credited while prepaid rent (also an asset) is debited.

Rent paid in advance is recorded as follows:

Dr Prepaid rent

Cr Cash

As the months go by, the prepaid rent is credited and rent expenses is debited.

Dr Rent expense month 1

Cr Prepaid rent month 1