Which of the following does not correctly describe an adjusting journal entry that debits rent expense and credits prepaid rent?

A) The entry increases expenses and decreases stockholders' equity.
B) The entry decreases net income and decreases assets.
C) The entry increases expenses and decreases current assets.
D) The entry decreases net income and decreases liabilities.

Rent Expense

The cost incurred for using property or equipment under a lease agreement.

Prepaid Rent

Payments made in advance for rent, which is recorded as an asset initially and then expensed over the period the payment covers.

Adjusting Journal Entry

A journal entry made at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.