CA Foundation Exam > CA Foundation Questions > Prepaid Rent is shown as :a)Current assetb)Cu...
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Prepaid Rent is shown as :
- a)Current asset
- b)Current Liability
- c)Fixed asset
- d)Income
- e)
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
Prepaid Rent is shown as :a)Current assetb)Current Liabilityc)Fixed as...
A current asset account that reports the amount of future rent expense that was paid in advance of the rental period. The amount reported on the balance sheet is the amount that has not yet been used or expired as of the balance sheet date.
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Prepaid Rent is shown as :a)Current assetb)Current Liabilityc)Fixed as...
Prepaid Rent as a Current Asset:
Prepaid rent is considered a current asset because it represents an amount paid in advance for the use of a property or space. It is an asset because it provides future economic benefits to the company.
Definition of a Current Asset:
Current assets are assets that are expected to be converted into cash or used up within one year. They are typically listed on the balance sheet in order of liquidity.
Characteristics of Prepaid Rent:
- Prepaid rent is an advance payment made for the use of a property or space.
- It represents a future economic benefit that the company will receive.
- The amount of prepaid rent will be used up over time as the company uses the property or space.
Impact on Financial Statements:
- Prepaid rent is reported on the balance sheet as a current asset.
- As the prepaid rent is used up over time, it is recognized as an expense on the income statement.
- The company must adjust its prepaid rent account each accounting period to reflect the portion of rent that has been used up.
Conclusion:
In conclusion, prepaid rent is classified as a current asset because it represents an amount paid in advance for future economic benefits. It is an important part of a company's financial statements and must be properly accounted for to accurately reflect the company's financial position.
Prepaid rent is considered a current asset because it represents an amount paid in advance for the use of a property or space. It is an asset because it provides future economic benefits to the company.
Definition of a Current Asset:
Current assets are assets that are expected to be converted into cash or used up within one year. They are typically listed on the balance sheet in order of liquidity.
Characteristics of Prepaid Rent:
- Prepaid rent is an advance payment made for the use of a property or space.
- It represents a future economic benefit that the company will receive.
- The amount of prepaid rent will be used up over time as the company uses the property or space.
Impact on Financial Statements:
- Prepaid rent is reported on the balance sheet as a current asset.
- As the prepaid rent is used up over time, it is recognized as an expense on the income statement.
- The company must adjust its prepaid rent account each accounting period to reflect the portion of rent that has been used up.
Conclusion:
In conclusion, prepaid rent is classified as a current asset because it represents an amount paid in advance for future economic benefits. It is an important part of a company's financial statements and must be properly accounted for to accurately reflect the company's financial position.
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Prepaid Rent is shown as :a)Current assetb)Current Liabilityc)Fixed as...
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Prepaid Rent is shown as :a)Current assetb)Current Liabilityc)Fixed assetd)Incomee)Correct answer is option 'A'. Can you explain this answer?
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Prepaid Rent is shown as :a)Current assetb)Current Liabilityc)Fixed assetd)Incomee)Correct answer is option 'A'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Prepaid Rent is shown as :a)Current assetb)Current Liabilityc)Fixed assetd)Incomee)Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Prepaid Rent is shown as :a)Current assetb)Current Liabilityc)Fixed assetd)Incomee)Correct answer is option 'A'. Can you explain this answer?.
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