If The Payment Of Cash For Rent Was Journalized And Posted In Error As A Debit To Miscellaneous Expense Instead Of Rent Expense, The Correcting Entry Will Include A Credit To Cash. True Or False

If The Payment Of Cash For Rent Was Journalized And Posted In Error As A Debit To Miscellaneous Expense Instead Of Rent Expense, The Correcting Entry Will Include A Credit To Cash. True Or False Question Answer

Answer Of True And False (T&F) Question With Brief Explanation

The answer to this statement is “False”, as the rectifying or correcting entry (CE) will include a credit to miscellaneous expense account which was wrongly debited, now credited it to cancel the effect of Miscellaneous Expense Account and Rent Expense Account is debited in the CE.

The correct journal entry, which should be recorded, for rent paid for cash includes a debit to rent expense account and a credit to cash account as shown below:

                                            RE expense a/c  XXX

                                                                          Cash a/c XXX

                                     (RE Paid For Cash During The Current Accounting Period)

As, RE account is incurring, so we debit it but cash is decreasing as it is an outflow i.e., cash, as a current asset, is going out of the business, so we credit it according to the Rules of Debit and Credit. RE account is recorded on Income Statement while cash account is recorded on the assets side under current assets section of the balance sheet.

The wrong entry recorded include a debit to Miscellaneous account instead of rent expense account and a credit to cash account as shown below:

                                                        ME a/c  XXX

                                                                      Cash a/c  XXX

                                    (Wrongly Debit ME Account Instead Of RE Account)

Now, the correcting entry is record in such a way that we get the CE. So, we debit rent expense account and credit miscellaneous account as shown below:

                                                  RE a/c  XXX

                                                                  ME a/c  XXX

                           (To Rectify, RE Account Debited And ME Account Credited)

In rectify entry, we need to write off ME account as it is wrongly debited instead of RE account, so to get the entry, we credit ME account and debit RE account to get the CE and it is proved by comparing wrong entry with the correcting or rectifying entry, we get the CE in which rent expense account is debited and cash account is credited.

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