Is prepaid rent debit or credit?
Understand the Problem
The question is asking whether prepaid rent is recorded as a debit or a credit in accounting. Prepaid rent is considered an asset because it represents a payment made in advance for future use of a property or service, hence it is recorded as a debit.
Answer
Debit
The final answer is that prepaid rent is a debit.
Answer for screen readers
The final answer is that prepaid rent is a debit.
More Information
Prepaid rent is recorded as a debit because it is an asset account. The initial entry increases the prepaid rent (an asset) and decreases cash (also an asset). As the rent is used, the expense is recorded by debiting rent expense and crediting prepaid rent.
Tips
A common mistake is treating the prepaid rent directly as an expense. It's important to recognize it as an asset until the rental period is utilized.
Sources
- Prepaid Rent & Other Rent Accounting Under ASC 842 Explained - finquery.com
- Prepaid Expenses - Corporate Finance Institute - corporatefinanceinstitute.com
- What is the journal entry to record a prepaid expense? - universalcpareview.com
