PRC-1 · Chapter 4 · Question 46 of 100
A business paid Rs. 50,000 for the rent of the owner's personal residence and incorrectly charged it to the business's 'Rent Expense' account. What is the correcting journal entry?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Debit Drawings Rs. 50,000, Credit Rent Expense Rs. 50,000
Explanation
Personal rent is a drawing, not a business expense. To correct the error, Drawings must be debited (increased), and the erroneously recorded Rent Expense must be credited (decreased).
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