What do you debit and credit for the following transactions?
1. Repair parts used during January, $4000. (Hint: Debit this to Repair Parts Expense.)
2. Rent expense for the month of January recorded. However, no cash was paid. A rent payment had been made for three months, in advance, on December 1, 2002, in the amount of $4500.
1. To determine what to debit and credit for the transaction involving repair parts used during January, you need to understand the basic principles of accounting. In this case, the hint suggests that you should debit this to Repair Parts Expense.
To record this transaction, you would:
- Debit Repair Parts Expense for $4000: This increases the expense account, representing the cost of the repair parts used during January.
- Credit Accounts Payable for $4000: This records the liability owed to the supplier of the repair parts.
2. To determine what to debit and credit for the rent expense recorded in January with no cash payment, but with a payment made in advance for the three months starting on December 1, 2002, you need to consider the timing and recognition of expenses and cash payments.
To record this transaction, you would:
- Debit Rent Expense for $1500: This represents one month of rent expense for January.
- Credit Prepaid Rent for $1500: This reduces the prepaid rent account since one month out of the three paid in advance has been used up.
Note that the prepaid rent account might have an initial credit balance of $4500 (3 months x $1500 per month). By debiting Rent Expense and crediting Prepaid Rent for $1500, you are recognizing one month's worth of rent expense and reducing the prepaid rent balance accordingly.