If Melanie's Lemonade Stand paid rent for the month of January on 1/5, what account is debited and what account is credited on 1/5? (Select ALL that apply) A) Debit Prepaid Rent B)... If Melanie's Lemonade Stand paid rent for the month of January on 1/5, what account is debited and what account is credited on 1/5? (Select ALL that apply) A) Debit Prepaid Rent B) Credit Prepaid Rent C) Credit Accounts Payable D) Debit Rent Expense E) Credit Cash F) Debit Accounts Payable G) Debit Cash H) Credit Rent Expense
Understand the Problem
The question is asking about the accounting entries related to paying rent for a business. It requires identifying which accounts are debited and credited in the transaction for the month of January when rent is paid.
Answer
Debit Prepaid Rent, Credit Cash
The accounts affected when rent is paid are 'Debit Prepaid Rent' and 'Credit Cash'.
Answer for screen readers
The accounts affected when rent is paid are 'Debit Prepaid Rent' and 'Credit Cash'.
More Information
When rent is paid in advance for a period like a month, it is considered a prepaid expense. Thus, the Prepaid Rent account is debited (increased as an asset) and Cash is credited (decreased).
Tips
A common mistake is confusing Prepaid Rent with Rent Expense. Prepaid Rent is used when the rent is paid in advance.
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