When paying the building lease in adavance of the current month.

fostertina · #1 Dec 28, 2007, 09:54 AM

I'd like to pre-pay the building lease and don't want the expense to be doubled on my income statement for the current month since I've already paid the rent for this month. I believe that I need to set up a pre-paid GL account on the balance sheet. I don't have any pre-paid accounts on my chart of accounts currently and am not positive if it should be a liability account or an asset account. I think it's an asset account however and the entry would be a credit to cash and a debit to pre-paid rents, correct? Thanks for your help.

janiml · Dec 28, 2007, 03:42 PM

A prepaid account is a current asset. You are correct, you would debit the prepaid account and credit cash. Don't forget to reverse the entry on the first of the following month.



At Ask Me Help Desk you can ask questions in any topic and have them answered for free by our experts. To ask questions or participate in answering them you must register for a free account. By registering you will be able to: Get free answers from experts in any of our 300+ topics. Accept money for answers that you provide. Communicate privately with other members (PM). See fewer ads. Sign Up!