Assume that cash is paid for rent to cover the next year.The appropriate debit and credit are:

Question

Quizplus · Accepted Answer

When cash is paid for rent to cover the next year, it means that the rent is prepaid. So, the appropriate debit would be to Prepaid Rent account and the credit would be to Cash account. This is in accordance with the accrual accounting principle of recognizing expenses when they are incurred and not when they are paid. Only option C reflects this transaction accurately.

Assume That Cash Is Paid for Rent to Cover the Next