passwella.
Menu

GCE Financial Accounting 1989 Question 24

Question 24

Accounting Equation

Outstanding rent of ₦300 is paid by the proprietor. The effect on the balance sheet is that

  1. A.both the liability and asset are increased
  2. B.both the liability and asset are decreased
  3. C.liability is increased while the asset is decreased
  4. D.liability is decreased while the asset is increased
  5. E.both liability and asset remain unchanged.
Show the answer and explanation

Answer: B (both the liability and asset are decreased)

Explanation

Paying rent owed reduces the liability (rent owing) and reduces cash, an asset.