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Jun 11, 2018
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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)

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