ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Rent expense is a type of fixed operating cost or an absorption cost for a business, as opposed to a variable expense. Rental expenses are often subject to a one-or two-year contract between the lessor and lessee, with options to renew.

Detailed explanation-2: -In an accrual basis of accounting, if rent is paid in advance, it is considered as an asset, and once the facility is utilised, it is then considered an expense.

Detailed explanation-3: -Rent expense is an account that lists the cost of occupying rental property during a reporting period. This expense is one of the larger expenses reported by most organizations, after the cost of goods sold and compensation expense.

Detailed explanation-4: -An example of fixed cost is a rent payment. If a company pays $5, 000 in rent per month, it remains the same even if there is no output for the month. Conversely, a variable cost is dependent on the production output level of goods and services.

Detailed explanation-5: -Fixed costs are expenses that a company pays that do not change with production levels. Rent is one example.