Answer to Question #164482 in Accounting for Milan

Question

Debit Expense

Credit Prepaid Expense

What does this mean?

Debit Prepaid Expense

Credit Cash

What does this mean?

Debit Expense

Credit Accrued Liability

What does this mean?

Debit Rent Expense

Credit Prepaid Rent

What does this mean?

Debit Insurance Expense

Credit Prepaid Insurance

What does this mean?

Debit Bad Debt Expense

Credit Allowance for Doubtful Accounts

What does this mean?

Answer 1

a) Debit Expense is an expense that cause owner's equity to decrease.

Credit Prepaid Expense is an expenditure paid in one accounting period, but will not be recognized until a later accounting period.

b) Debit prepaid expenses are the payments that have not been paid in advance by a business for services still to be used.

Cash credit is a short-term financing solution a business customer has at their disposal.

c) Debit Expense is an accounting entry that either increases an asset or expense account, or decreases a liability or equity account.

Credit Accrued Liability is an accrued liability represents an expense a business has incurred during a specific period but has yet to be billed for. ... They appear on the balance sheet under current liabilities.

d) Debit expense means cash was paid out, the asset account Cash is credited and another account needs to be debited. Because the rent payment will be used up in the current period it is considered to be an expense, and Rent Expense is debited.

Credit Prepaid Rent means the initial journal entry for prepaid rent is a debit to prepaid rent and a credit to cash. These are both asset accounts and do not increase or decrease a company's balance sheet.

e) Debit Insurance Expense means, when the insurance premiums are paid in advance, they are referred to as prepaid. As the prepaid amount expires, the balance in Prepaid Insurance is reduced by a credit to Prepaid Insurance and a debit to Insurance Expense.

Credit Prepaid Insurance actually means prepaid insurance is usually charged to expense on a straight-line basis over the term of the related insurance contract. When the asset is charged to expense, the journal entry is to debit the insurance expense account and credit the prepaid insurance account.

f) Debit Bad Debt Expense means when accountants record sales transactions, a related amount of bad debt expense is also recorded. This is recorded as a debit to the bad debt expense account and a credit to the allowance for doubtful accounts.

The purpose of the allowance for doubtful accounts is to estimate how many customers out of the 100 will not pay the full amount they owe. Rather than waiting to see exactly how payments work out, the company will debit a bad debt expense and credit allowance for doubtful accounts.