Question 7
ABC incorporation rented out an office space for running its business. It entered into an agreement with the owner of the space on 1^(st) January 2025 and agreed to pay a monthly rent of INR 1,00,000, payable on the 1^(st) of every month starting January 1^(st). How would this transaction be recorded in the balance sheet and P&L statement prepared on 1^(st) January 2025?
No impact on balance sheet and cashflow statement.
Cash balance reduces by INR 1,00,000 and Expenses increases by the same amount
Cash balance reduces by INR 1,00,000 and create a new line item in asset section titled “Right to use office space” as INR 1,00,000
Cash balance reduces by INR 1,00,000