If a business issued a check for $1,000 to pay for two months rent in advance, what is the effect on the firms' assets, liabilities and owner's equity.
A)Owner's Capital will increase
B)Accounts Payable will increase
C)Prepaid Rent will decrease
D)Cash will decrease

Question

Quizplus · Accepted Answer

Issuing a check decreases the firm's cash balance, which is an asset. There's no effect on liabilities or owner's equity in this transaction, and prepaid rent actually increases, not decreases, as it represents a future benefit.

If a Business Issued a Check for $1,000 to Pay