The rent paid to landlord is credited to (a) Landlord’s account. (b) R...
The rent paid to the landlord is credited to the cash account.
In double-entry bookkeeping, every financial transaction involves a debit and a credit. When rent is paid to the landlord, the cash account is debited (decreased) and the rent account is credited (increased). This is because the cash account represents the company's available cash resources, which are being used to pay the rent, while the rent account represents the company's obligation to pay rent.
The rent paid to landlord is credited to (a) Landlord’s account. (b) R...
Rent paid to landlord is credited to Cash account.
Explanation:
When a tenant pays rent to the landlord, it is considered a cash transaction. The tenant is paying the landlord in cash for the use of the rented property. Therefore, the rent paid to the landlord is credited to the Cash account.
Reasoning:
1. Cash payment: The rent paid by the tenant is considered a cash payment because it involves the exchange of cash from the tenant to the landlord. Cash transactions are recorded in the Cash account.
2. Crediting the Cash account: When cash is received, it is recorded as a credit entry in the Cash account. This is because credits represent an increase in assets, and cash is an asset. By crediting the Cash account, we are increasing the balance of cash on hand.
3. Dual-entry accounting: According to the principle of double-entry accounting, every transaction must have two entries - a debit and a credit. In this case, the debit entry will be made to the Rent account, which represents an expense for the tenant. The credit entry will be made to the Cash account, representing an increase in cash for the landlord.
4. Recording the transaction: To record the rent payment, the journal entry will be as follows:
- Debit Rent account (expense account) - representing the decrease in the tenant's expenses.
- Credit Cash account - representing the increase in the landlord's cash on hand.
Conclusion:
The rent paid to the landlord is credited to the Cash account because it is a cash transaction and follows the principles of double-entry accounting. By crediting the Cash account, we are increasing the balance of cash on hand for the landlord.