Included in the telephone rentals account at 31 December 2021, Rick had included business telephone rental of £150 paid in advance for 2022.
The double entry for this should be
Increase an asset a/c= DEBIT EXPENSE A/C £150
Decrease an expense a/c CREDIT PREPAYMENT A/C £150

Question

Quizplus · Accepted Answer

The double entry is correct because it increases the asset account (prepayment) and decreases the expense account (telephone rentals). This is because the £150 paid in advance for 2022 is an asset to the company as it will be used in the future.

Included in the Telephone Rentals Account at 31 December 2021