Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

Which of the following transactions results in a debit to Cash and a credit to Deferred Rent Revenue?

Paying deferred rent revenue to a landlord

Paying rent expense in advance for future periods

Collecting cash from a customer for services already performed

Receiving advance payment of rent from a tenant for future periods

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Verified step by step guidance

Step 1: Understand the nature of the transaction. The problem involves receiving advance payment of rent from a tenant for future periods. This means cash is received upfront, but the revenue is not yet earned, as the service (use of the rented space) will be provided in the future.

Step 2: Recall the accounting principle of deferred revenue. Deferred revenue is a liability account that represents money received for goods or services that have not yet been delivered or performed. In this case, the rent payment received in advance is considered deferred rent revenue.

Step 3: Analyze the journal entry. When cash is received, the Cash account (an asset) is debited because cash is increasing. At the same time, the Deferred Rent Revenue account (a liability) is credited because the company now has an obligation to provide the rented space in the future.

Step 4: Write the journal entry in terms of debits and credits. The journal entry would look like this: Debit Cash (to increase the asset account) and Credit Deferred Rent Revenue (to increase the liability account).

Step 5: Confirm the logic of the transaction. Receiving advance payment of rent aligns with the accounting treatment of deferred revenue, as the company has not yet earned the revenue but has received cash upfront. This ensures proper matching of revenue recognition with the period in which the service is provided.