A company records a transaction in which six months' rent is paid in advance.Which of the following journal entries records the transaction?
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

The payment of rent in advance is recorded as a prepaid expense, which is an asset. Therefore, Prepaid Rent should be debited, and Cash should be credited to record the payment. The other options do not correctly record the transaction. Rent Receivable is a liability account used to record rent that has not yet been paid, Rent Revenue is a revenue account that records income generated from renting, and Rent Expense is used to record the cost of rent when it is paid, not when it is prepaid.

A Company Records a Transaction in Which Six Months' Rent