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Jones Company paid $1,200 with cash this year in January for six months rent. Therefore, it will be used up before the end of the year when the financials are prepared. Since it is short lived and will be used up during this accounting period, Jones Company decided to record it as an expense instead of an asset at the time of payment.

The journal entry to record this transaction when Jones Company pays the cash for the six months rent would be: ___________

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Answer:

Jones Company

The journal entry to record this transaction when Jones Company pays the cash for the six months rent would be: ___________

Journal Entry:

January 2, 2020:

Debit Rent Expense $1,200

Credit Cash $1,200

Explanation:

However, the proper record should have been to debit Prepaid Expense and credit Cash so that as the rent is being consumed, perhaps on a monthly basis, the Rent Expense account is debited while the Prepaid Expense account is credited.  However, the decision to record it as an expense at the time of payment will not affect the correct recording of the transaction during the accounting period.

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