When a Landlord Records Rent Received in Advance from a Tenant

question 82

Essay

When a landlord records rent received in advance from a tenant in a revenue account, the adjusting entry required at year end to allocate the rent to the proper periods has an impact on financial statement elements. What effect (increase, decrease, no effect) does the required adjustment have on each of the following elements?
$\begin{array}{|l|l|}\hline \text { Assets } & \text { Revenues } \\\hline \text { Liabilities } & \text { Expenses } \\\hline \text { Shareholders' equity } & \\\hline\end{array}$

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Definitions:

DRD

Dividends Received Deduction, a tax deduction in the United States that allows corporations to deduct dividends received from their taxable income.

Taxable Income

The amount of income used to calculate how much tax an individual owes to the government, considering all income sources and permissible deductions.

Charitable Organization

A nonprofit entity that operates for the public good, often focused on educational, religious, or humanitarian goals.

Publicly-traded Corporation

A company whose shares are openly sold and traded to the public on one or more stock exchanges.