Prepaid Rent Revenue Journal Entry

Journal entry for prepaid income with the golden rule.

Prepaid rent revenue journal entry. The adjusting entry on january 31 would result in an expense of 10 000 rent expense and a decrease in assets of 10 000 prepaid rent. Example journal entry for prepaid rent company b paid 60 000 rent 5 000 x 12 months in the month of december which belongs to the next year and doesn t become due until january of the following year. Rent expense journal entry at the end of the month the company usually make journal entry by debiting rent expense account and crediting prepaid rent account to recognize the expense for the rental facility that the company has used for the period. So from 01 04 2018 to 31 07 2018 is advance rent received.

Months from 1 4 18 to 31 07 18 4 5000 20 000 2. The following unearned revenue journal entry example provides an understanding of the most common type of situations where such a journal entry account for and how one can record the same as there are many situations where the journal entry for unearned revenue pass it is not possible to provide all the types of examples. In any case prepaid rent journal. Refer to the first example of prepaid rent.

Because current financial year ends on 31 03 2018. At the end of april one third of the prepaid rent expense 1 000 will have been used up as the business has used the premises for that month. The ratio which is calculated by dividing current belongings by present liabilities shows how properly an organization manages its steadiness sheet to pay off its quick term debts and payables. In this case one asset pre paid rent has been increased by 3 000 and the other cash has been reduced by a similar amount.

The adjusting journal entry for a prepaid expense however does affect both a company s income statement and balance sheet. The rent repayment is calculated as follows. Hence the journal entry above is simply increasing one asset prepaid rent together with the decreasing of another asset cash. Prepaid rent journal entry.

These prepaid expenses may include prepaid rent prepaid insurance and supplies etc. On 01 08 2017 rent of rs. Prepaid rent occurs when a tenant or renter prepays a portion of rent before it is due. The company will pass this adjusting journal entry every month for the next 12 months to prepare and present the correct monthly financial statement of the company after which the balance of prepaid rent and insurance account will become nil.

Likewise the company needs to account for any prepaid expense with the proper journal entry to avoid misstatement that could occur on financial statements due to inappropriate recognition. On december 31 2018 company y ltd paid the salaries for january 2019 amounting to 10 000 in advance to the employees of the company.