Question

A business prepays four months of office rent. Which of the following accounts is debited?

1) Rent Expense
2) Prepaid Rent
3) Cash
4) Accounts Payable

Answer 1

In accounting, when a business prepays rent, the Prepaid Rent account is debited, as this payment is considered a current asset that provides future economic benefit.

Step-by-step explanation:

When a business prepays four months of office rent, the account that is debited is Prepaid Rent. This is because prepaying the rent represents a future economic benefit for the business, as the space will be used over the coming months. Therefore, it is treated as an asset on the balance sheet. The entry to record this transaction in the company's accounting system would include a debit to the Prepaid Rent account (increasing the asset) and a credit to the Cash account (decreasing the asset) if the payment was made in cash, or Accounts Payable if the payment has been made on credit.