Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 38 - No. 7)
A company pays rent for the next 3 months in advance. How should the company record this transaction?
Debit Rent Expense; Credit Cash.
Debit Prepaid Rent; Credit Cash.
Debit Cash; Credit Rent Revenue.
Debit Rent Expense; Credit Prepaid Rent.
Explanation
The correct entry is to increase an asset (Prepaid Rent) and decrease Cash.
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