Question

If an adjusting entry includes a debit to Rent Expense, it indicates that the payment of rent had been previously recorded as a(n) ________.

A. depreciation expense
B. accrued expense
C. deferred expense
D. accrued revenue
E. None of the above

Answer 1

An adjusting entry with a debit to Rent Expense suggests rent was previously recorded as a deferred expense, representing advance payment that's allocated to the current accounting period via an adjusting entry.

Step-by-step explanation:

If an adjusting entry includes a debit to Rent Expense, it indicates that the payment of rent had been previously recorded as a deferred expense. This means that the company paid for rent in advance, and at the end of the accounting period, it needs to record the amount of rent that actually pertains to that period. This is accomplished through an adjusting entry that increases (debits) rent expense and decreases (credits) the prepaid rent account.