To reduce three months of accrual rental income than the total of profit entries of the account. It reduces the credit balance to be transferred to the income statement from $1,600 of rent income earned. It is described as 'prepayment cut'.

To reduce the amount on the accrual rental income by the accounting journal. The amount is recorded to be transferred to the income statement in the calculation of the profit or loss of the accounting year.

To adjust the amount the bakery has supplied space to its premises, the prepayment is an income payable in current liability.

To record three months of rent paid in advance.