Multiple choice

Outstanding rent is an example of

  1. increase in asset and decrease in owner's liability

  2. increase in liability and decrease in owner's liability

  3. decrease in liability and owner's liability

  4. increase in asset and owner's liability
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Outstanding rent represents rent owed but not yet paid - this creates a liability (money owed to landlord). When rent expense is recognized, it reduces the owner's equity/profits. Therefore, outstanding rent increases liabilities while decreasing owner's equity (called 'owner's liability' in some contexts). Option A incorrectly says asset increases. Options C and D have the direction wrong.

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