An amount of rs. 36000 was paid as advance rent for three months. paid rs.60000 cash on the purchase of equipment costing rs.80000
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Prepaid Rent A/C Dr. 36,000
Prepaid Rent A/C Dr. 36,000
To Cash A/C 36,000
Equipments A/C Dr. 80,000
To Cash A/C 60,000
To Creditors A/C 20,000
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Explanation -:
Prepaid rent is an asset thus it's debited, and cash is what goes out and we always credit the thing that goes out of the firm.
60,000 is paid in cash and rest is what we are yet to give, that's why it's added in the creditors A/C.
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