BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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debit Prepaid Rent, ₱4, 000; credit Rent Expense, ₱4, 000
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debit Rent Expense, ₱4, 000; credit Prepaid Rent, ₱4, 000
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debit Prepaid Rent, ₱8, 000; credit Rent Expense, ₱8, 000
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debit Rent Expense, ₱8, 000; credit Prepaid Rent, ₱8, 000
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Detailed explanation-1: -Adjustments for prepaid expenses To do this, debit your Expense account and credit your Prepaid Expense account. This creates a prepaid expense adjusting entry. Let’s say you prepay six month’s worth of rent, which adds up to $6, 000. When you prepay rent, you record the entire $6, 000 as an asset on the balance sheet.
Detailed explanation-2: -The correct answer is d. Increases the balance of an expense account. A liability is increased when an expense is incurred and not paid for in the first place. Therefore, if the credit portion of an adjusting entry results in an increase in a liability account, then it merely means that an expense has been accrued.
Detailed explanation-3: -The correct answer is c) increases the balance of a liability account.
Detailed explanation-4: -Supplies Expense, debit; Supplies, credit. This is the correct option. the expense must increase with a debit entry and the supplies asset decrease with a credit entry.