Question

This journal-Paid rent of shop for the period

Answer 1

If the lessee paid the rent in advance for one year, the accounting journal entry: Debit- Prepaid Rent 12K$ and Credit- Cash on Hand (if paid in cash) or Cash in Bank (if paid by check) for 12K$. Since it is a prepayment, the accountant must adjust the prepayment account monthly by 1k via the following entry: Debit-Rent Expense 1K$ and Credit-Prepaid Rent 1K$. The adjustment must be done on a monthly basis until the 12K$ prepayment is fully expended. If there is a balance on the prepayment at the end of the accounting period, it should be recognized as a current asset in the balance sheet, while the total rent expense should be recognized as operating expense in the income statement.

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