Use the following information to answer this question.

Rent prepaid – 1/01/2014 – N600
Rent paid – 31/12/2014 – N3,000
Rent prepaid – 31/12/2014 – N400.

Rent for 2014 chargeable to the profit and loss account is?

A. N4,000
B. N3,000
C. N3,200
D. N2,800

Correct Answer: Option B

B. N3,000

Explanation

Prepaid rent is an advance payment on a lease of property. The amount of the prepayment is carried on the books of the business leasing the property as a current asset account that will be expensed at some point in the future. The prepaid rent will be charged as a current asset in the balance sheet to be expensed as some future date when it becomes due. so N3000 will be recorded on the credit side of the profit and loss account.