Which of the following transactions and events results in a decrease in both total assets and net income?

Recognising previously recorded deferred revenue as revenue.

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Collecting cash from an account receivable.

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The accrual of wages expense at year-end.

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Adjustment of the prepaid rent account for rent used during the period.

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Solution

The correct option is D
Adjustment of the prepaid rent account for rent used during the period.

Answer d. Adjustment of the prepaid rent account for rent used during the period
Explanation: A prepaid cost is a kind of resource on the monetary record that results from a business making settlements ahead of time, for services and products to be gotten later on. Prepaid costs are at first recorded as assets, yet their worth is discounted over the long run onto the income statement.

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Similar questions

Q. Give one example of each of the following transactions:
(i) Increase in an asset and a liability.
(ii) Decrease in an asset and a liability.
(iii) Increase in assets and capital.
(iv) Decrease in assets and capital.

Q. Calculate Cash Flow from Operating Activities from the following information.

Particular	31^st March 2017 (Rs)
Net Profit (Difference between Closing and Opening Balance of Surplus, i.e., Balance in Statement of Profit and Loss)	8,00,000
Final Dividend paid in the year	1,10,000
Compensation for Natural Disaster credited to Statement of Profit and Loss	75,000
Depreciation	1,50,000
Loss on Sale of Investment	30,000
Gain (Profit) on Sale of Land	90,000
Provision for Tax	1,10,000
Dividend Received	20,000
Decrease in Current Assets (Other than Cash and Cash Equivalents)	40,000
Increase in Current Liablilities	70,000
Decrease in Current Liabilities	10,000
Increase in Current Assets (Other than Cash and Cash Equivalents)	60,000
Income Tax Refund	10,000
Income Tax Paid	1,20,000

Q. In the Receipt and Payment account both capital and revenue transactions are recorded, whereas in Income and Expenditure account ________ transactions are recorded.

Q. _________ is an art of recording, classifying, summarising transactions and events which are of financial character in terms of money and interpreting the result thereof.

Give an example for each of the following types of transaction.
(i) Increase in one asset, decrease in another asset.
(ii) Increase in asset, increase in liability.
(iii) Increase in asset, increase in owner's capital.
(iv) Decrease in asset, decrease in liability.
(v) Decrease in asset, decrease in owner's capital.
(vi) Decrease in liabilities, increase in owner's capital.
(vii) Increase in one liability, decrease in another liability.
(viii) Increase in liabilities, decrease in owner's capital.

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