Question

Out of the rent paid this year Rs.3000 relates to next year

Answer 1

Answer:

Journal Entry for Prepaid Expenses :

Prepaid Expenses are those expenses which are paid in advance i.e., not related to the current year, paid for the next accounting year,benefit for such expenses will be received during the next accounting year.

Since it is paid in advance So It acts as an asset and as per rule "debit the increase in asset" and "credit the decrease in expenses" (modern approach). The journal entry for prepaid expenses involves two accounts: Prepaid Expense A/C and Expense A/C. Following entry will be passed:

Prepaid Expense A/c. Dr... [Amount] To Expense A/c [Amount] (Being Expense paid in advance)

Let's take a example of your above mentioned transaction, Out of the rent paid this year, 5,000 is related to next year. The journal entry will be.

Prepaid Rent A/c. Dr... 5,000 To Rent A/c. 5,000 (Being Rent paid in advance).