EXPENSES AND COST OF SALES PART 1

Goods are considered as SOLD when:

• an ORDER is received

• CASH is received

• goods are DELIVERED

My rent expense is $2000/ mth. In March, I paid $4000 for March and April.

Rent expense for March =

• $4000

• $2000

My rent expense is $4000/mth. I paid $3000 only.

Rent expense (March) =

• $4000

• $3000

My rent expenses is $5000/mth. I paid $3000 only.

• Rent expense PAYABLE = $2000

• PREPAID rent expense = $2000

My rent expense is $5000/mth. I paid $6000.

• Rent expense PAYABLE = $1000

• PREPAID rent expense = $1000

Cash paid for rent expense = $4000. I still OWE $1000 for rent expense.

Rent expense INCURRED (actual) =

• $3000

• $5000

Cash paid for rental expense = $4000. This included a PREPAID of $1000.

Rent expense INCURRED (actual) =

• $3000

• $5000

Cash PAID - PREPAID = expense INCURRED (actual)

• True

• False

PREPAID expense = current

• ASSET

• LIABILITY

expense PAYABLE = current

• ASSET

• LIABILITY