Question

Which of the following entries records the receipt of cash for two months' rent? The cash was received in advance of providing the service. a.Prepaid Rent, debit; Rent Revenue, credit b.Cash, debit; Rent Expense credit c.Cash, debit; Unearned Rent, credit d.Cash, debit; Prepaid Rent, credit

Answer 1

Answer:

C

Debit cash , Credit unearned rent

Explanation:

This is a transaction that affects cash and unearned revenue account as the rent is not yet earned as being paid in advance. In other to avoid overstatement of income as the accrual system specify that income should be recorded when earned , the transaction is recorded in the unearned account.

An increase in the cash account is recorded as a debit entry while an increase in the unearned revenue account is a credit entry. Therefore , the cash account is debited with the cash collected and the unearned account credited with the same amount.