Pre Paid rent

I am just starting out doing some bookeeping for a friend. She paid her 1st and last months rent plus a security deposit. How will I post the last months rent and the security deposit?

Hello,

Thank you for your inquiry.

Both the prepaid rent and security deposits should be set up as Other Asset accounts.

The initial transaction when payment is made would be:

CREDIT Bank Account
DEBIT Prepaid Rent
DEBIT Rental Security Deposit

On the date that the last months rent is being used you would prepare the following journal entry:

CREDIT Prepaid Rent
DEBIT Rent Expense

On the date that the rental security deposit is received back and/or used you would prepare the following journal entry:

CREDIT Rental Security Deposit
DEBIT Expense Account (for any amounts used)
DEBIT Bank Account (for any amount left over)

Prepaid Estimated Taxes

How should I record an estimated tax payment?

As a prepaid Asset? And then adjust it when I pay the actual tax at the end of the year?

Hi,

Thanks for your question. If you are a sole proprietor paying your estimated tax payments out of your business account, the payments would be posted as an Owner's Equity Draw Sub-account as follows:

DEBIT Owner's Draw: Estimated Taxes
CREDIT Bank Account

Prepaid Expenses

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