Prepaid Rent
Definition: Rent paid in advance
Scope:NarrowDifficulty:Very Easy
Rent paid in advance
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Pay 3 months rent in advance | ||
| Pay $9,000 covering Jan–Mar. | ||
| Prepaid RentAsset+ | $9,000 | |
| CashAsset− | $9,000 | |
| Asset created for future benefit. | ||
| 2. Monthly adjusting entry | ||
| One month consumed: $9,000 / 3 = $3,000. | ||
| Rent ExpenseExpense+ | $3,000 | |
| Prepaid RentAsset− | $3,000 | |
| Expense recognized as space is used. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
Prepaid RentPrepaid RentAssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$9,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$3,000.00
$6,000.00
CashAsset account. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$9,000.00
$9,000.00
Rent ExpenseRent ExpenseExpenseA cost incurred in the process of earning revenue. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$3,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$3,000.00
DurationShort-Term
External Links
- Prepaid expense — Wikipedia