Question

Rent paid in Advance Rs 2,000 accounting equation for it​

Answer 1

Answer:

Explanation: Prepaid rent journal entry – Cash paid

Account Debit Credit

Prepaid rent account 3,000

Cash 3,000

Total 3,000 3,000

Prepaid Rent Payment Bookkeeping Entries Explained

Debit – What came into the business

An asset came into the business. The business has paid the rent in advance and has the right to use the premises for the following three month period of April, May, and June. The pre paid rent account is a balance sheet account shown under the heading of current assets.

Credit – What went out of the business

Cash went out of the business to make the prepayment.

The Accounting Equation and Prepaid Rent

The Accounting Equation, Assets = Liabilities + Owners Equity means that the total assets of the business are always equal to the total liabilities plus the equity of the business This is true at any time and applies to each transaction. For this transaction the Accounting equation is shown in the following table.

Prepaid Rent – Accounting Equation

Assets = Liabilities + Owners Equity

Prepaid rent – Cash = None + None

3,000 – 3,000 = 0 + 0

In this case one asset (pre paid rent) has been increased by 3,000 and the other (cash) has been reduced by a similar amount.

Answer 2

Given,

Rent paid in Advance Rs. 2000

To find,

Accounting equation

Solution,

The Accounting Equation,

Assets =Liabilities +Owners Capital

means that the total assets of the business are always equal to the total liabilities plus the equity of the business

In the given situation

Advance rent paid is considered as an increase in an asset for the entity and rent paid by cash/bank balance is the reduction of asset

Putting in the given equation

Assets= Liabilities+Owner's capital

(2000-2000)= 0

0=0

Hence, the equation tallies