Pre Paid Rent Bookkeeping Question

Prepaid Rent

Prepaid 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?


Comments for Pre Paid Rent Bookkeeping Question

Average Rating starstarstarstarstar

Click here to add your own comments

Aug 14, 2023
Rating
starstarstarstarstar 		How To Record Prepaid Rent Journal Entry
by: BB

Here is our instructional YouTube video for a step-by-step guide on How to Record a Prepaid Rent Journal Entry:
Jun 11, 2018
Rating
starstarstarstarstar 		Prepaid Rent Bookkeeping Answer
by: Stephanie

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)

Click here to add your own comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Bookkeeping Questions and Answers.

Prepaid Estimated Taxes

Prepaid Estimated Taxes

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?

Comments for Prepaid Estimated Taxes

Average Rating starstarstarstarstar

Click here to add your own comments

Aug 14, 2023
Rating
starstarstarstarstar 		Sole Proprietor Estimated Tax Payments
by: BB

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

Click here to add your own comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Bookkeeping Questions and Answers.

Prepaid Expenses Adjusting Entry

by Natty
(Sturgeon Falls, Ontario Canada)

Prepaid Expenses Adjusting Entry

Prepaid Expenses Adjusting Entry

How to post a prepaid insurance expense, or can I just post it as a one-time expense when invoiced? The payments are made monthly over a one-year period going into the next year. Nadeen

Comments for Prepaid Expenses Adjusting Entry

Average Rating starstarstarstarstar

Click here to add your own comments

Aug 14, 2023
Rating
starstarstarstarstar 		Adjusting Entry For Prepaid Expenses
by: BB

Prepaid insurance expenses are typically posted as an adjusting entry in accrual accounting to accurately reflect the expenses in the period they belong to. Posting them as a one-time expense when invoiced might not accurately represent the timing of the expenses.

To post a prepaid insurance expense:

Initial Payment Entry (When Payment is Made):

Debit: Prepaid Insurance Account
Credit: Cash/Bank Account
Monthly Adjustment Entry (End of Each Month):

Debit: Insurance Expense Account (monthly portion)
Credit: Prepaid Insurance Account (monthly portion)
Year-End Adjustment Entry (End of the Year):

Debit: Insurance Expense Account (remaining balance)
Credit: Prepaid Insurance Account (remaining balance)

This process distributes the prepaid insurance expense over the months it covers and reflects the gradual consumption of the prepaid insurance asset.

Click here to add your own comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Bookkeeping Questions and Answers.

Prepaid Expenses and Unearned Revenues.

by Patsy Maxey
(Gerorgia)

Prepaid Insurance Journal Entry

Prepaid Insurance Journal Entry

How would a copy of a Post journal entry look, to the general ledger accounts. Illustrate Insurance expense, Prepaid Insurance. Show how it should look...

Comments for Prepaid Expenses and Unearned Revenues.

Average Rating starstarstarstarstar

Click here to add your own comments

Aug 14, 2023
Rating
starstarstarstarstar 		Prepaid Insurance General Ledger Entry
by: BB

Here's an example of how a post journal entry for insurance expense and prepaid insurance would look when transferred to the general ledger accounts:

Post Journal Entry:

Debit: Insurance Expense
Credit: Prepaid Insurance
General Ledger Accounts:

Insurance Expense Account:

Date Description Debit ($) Credit ($)
MM/DD/YYYY Insurance Expense XXX.XX
Prepaid Insurance Account:

Date Description Debit ($) Credit ($)
MM/DD/YYYY Prepaid Insurance XXX.XX

In this example, the Insurance Expense account is debited with the appropriate amount, and the Prepaid Insurance account is credited with the same amount.

Click here to add your own comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Bookkeeping Questions and Answers.

Prepaid Lease

Prepaid Lease

Prepaid Lease

How do I record a prepaid auto lease for a 3-year lease and for personal use?

Comments for Prepaid Lease

Average Rating starstarstarstarstar

Click here to add your own comments

Aug 14, 2023
Rating
starstarstarstarstar 		Prepaid Lease Recording
by: BB

To record a prepaid auto lease for a 3-year lease and for personal use, you can follow these steps:

Create Prepaid Lease Asset Account: Set up a new prepaid lease asset account on your balance sheet. This account will represent the value of the prepaid lease.

Make Initial Journal Entry: When you make the initial payment to secure the 3-year auto lease, debit the Prepaid Lease Asset account and credit your Cash or Bank account.

Allocate Monthly Expense: At the beginning of each month, allocate a portion of the prepaid amount as an expense for that month. Debit the Auto Lease Expense account and credit the Prepaid Lease Asset account.

Repeat Monthly Entries: Continue this process at the start of each month throughout the lease period, gradually reducing the Prepaid Lease Asset account and increasing the Auto Lease Expense account.

Adjust at the End: At the end of each year, adjust the remaining balance in the Prepaid Lease Asset account by dividing it by the remaining number of months in the lease term. This will ensure a consistent monthly expense recognition.

Update for Personal Use: If the leased vehicle is also used for personal purposes, you'll need to allocate the business portion of the lease expense separately. Consult with a tax professional to determine the appropriate allocation method.

Click here to add your own comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Bookkeeping Questions and Answers.

Prepaid Loan Fees

by Derry
(Seattle)

Prepaid Loan Costs

Prepaid Loan Costs

We are prepaying loan costs for a customer and then the customer reimburses us. Should this be a prepaid asset?

Comments for Prepaid Loan Fees

Average Rating starstarstarstarstar

Click here to add your own comments

Aug 14, 2023
Rating
starstarstarstarstar 		Prepaid Asset Accounting
by: BB

Yes, when you prepay loan costs on behalf of a customer and then get reimbursed by the customer, you should treat the prepayment as a prepaid asset on your books.

This is because you have advanced funds for a future expense that will be reimbursed to you. The prepaid asset account represents the amount you have paid in advance, and as you get reimbursed, you will reduce the prepaid asset account and recognize the corresponding revenue.

Click here to add your own comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Bookkeeping Questions and Answers.

Prepayment Rent

by Mahmoud
(Kuwait)

Vendor Prepayment

Vendor Prepayment

How to treat prepaid expenses if the vendor gives the invoice and paid after 60 days?

Comments for Prepayment Rent

Average Rating starstarstarstarstar

Click here to add your own comments

Aug 14, 2023
Rating
starstarstarstarstar 		Prepayment Entry For Vendors
by: BB

When dealing with prepaid expenses where the vendor provides the invoice and payment is made after 60 days, you should follow these steps:

Record the Prepaid Expense: When you receive the invoice from the vendor, you should initially record the expense as a prepaid expense. Debit the relevant expense account and credit the prepaid expense account.

Adjustment at Payment: When the payment is made after 60 days, you need to adjust your books. Debit the prepaid expense account to reduce the prepaid amount and credit the cash or accounts payable account, depending on whether you made the payment in cash or on credit.

This approach ensures that your financial statements accurately reflect the timing of the expense. The initial entry recognizes the upcoming expense as a prepaid item, and the adjustment entry reflects the actual payment made and reduces the prepaid balance accordingly.

Click here to add your own comments

Join in and write your own page! It's easy to do. How? Simply click here to return to Bookkeeping Questions and Answers.


Please subscribe to my monthly newsletter, Bookkeeping Basics E-zine. It tells you every month about the new information that I have added, including some great tips and advice from myself and other Bookkeeping Basics readers.

Enter Your E-mail Address
Enter Your First Name (optional)
Then

Don't worry — your e-mail address is totally secure.
I promise to use it only to send you Bookkeeping Basics E-Zine.

Like Bookkeeping-Basics.net?