On September 1, the company pays rent for twelve months in advance and debits an asset account. At year end, the adjusting entry on the end-of-period spreadsheet would
A) increase an expense account
B) decrease a liability account
C) increase an asset account
D) decrease an expense account

Question

Quizplus · Accepted Answer

When rent is paid in advance, it is initially recorded as a debit to the pre-paid rent asset account. However, at the end of the period, an adjusting entry is required to recognize the rent expense for the period that has been used up. This adjusting entry will increase the rent expense account and decrease the pre-paid rent asset account. Therefore, the answer is A) increase an expense account.

On September 1, the Company Pays Rent for Twelve Months