A transaction in which six months' rent is paid in advance results in which of the following journal entries?
A) Prepaid Rent - Debit; Cash - Credit
B) Rent Receivable - Debit; Cash - Credit
C) Rent Revenue - Debit; Cash - Credit
D) Rent Expense- Debit; Cash - Credit

Question

Quizplus · Accepted Answer

When rent is paid in advance, it is recorded as a prepaid expense because the expense has not yet been incurred. Therefore, Prepaid Rent is debited to show an increase in the asset account, and Cash is credited to decrease the asset account.

A Transaction in Which Six Months' Rent Is Paid in Advance