passwella.
Menu

JAMB Principles of Accounts 1997 Question 15

Question 15

Accruals and Prepayments

Use the information below to answer questions 14 and 15.
On 30/5/93 Tolu & Co. paid 2 years rent of ₦50 000 which was debited to the rent account.
The adjustment needed as at 31st December, 1993 is

  1. A.debit rent account and credit adjustment account
  2. B.debit prepayment account and credit rent account
  3. C.debit rent account and credit prepayment account
  4. D.debit adjustment account and credit prepayment account.
Show the answer and explanation

Answer: B (debit prepayment account and credit rent account)

Explanation

The prepaid portion is an asset, so debit prepayment and credit rent, which reduces the rent expense for the year.