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BS IS SE or CF? rent exp

A) Balance Sheet
B) Income Statement
C) Statement of Equity
D) Cash Flow Statement

1 Answer

3 votes

Final answer:

Rent expense is classified as a component of the Income Statement (IS) because it is an operational cost that affects the company's net income for an accounting period.

Step-by-step explanation:

The question is asking to classify the term 'rent expense' as either a component of a Balance Sheet (BS), Income Statement (IS), Statement of Equity (SE), or Cash Flow Statement (CF). Rent expense is a type of cost typically associated with occupying a space for business operations, which is considered an operational cost.

Therefore, rent expense is recorded on the Income Statement (IS) as it is an expense that affects the company's net income for a particular accounting period. On the other hand, the Balance Sheet reports a company's assets, liabilities, and shareholders' equity at a specific point in time and would not typically include periodic expenses like rent.

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