We have given tenants a free month of rent as an inducment. This should be spread over the length of the lease. What journal entry is required to record this.

Superfly999

I suppose this would be a type of discount. So what I think the journal entries should be is.

Rent Discount -> Debit for rent payment
Accounts Receivable -> Credit their account for the rent payment

not entirely sure though so maybe wait for a better answer or someone to confirm this.

bhet

dr. Accounts receivable
dr. rent discount (your free rent, balancing figure)
cr. rent income ( Total rent + the free rent)

the free rent would be amortized over the life of the rent. by debeting cash, amortization of rent discount and crediting accounts receivable.

Superfly999

Question for bhet. Why would you cr rent income?; the reason I ask this is because you do not earn any income off of that free month. So shouldn't you just dr the rent discount and cr the accounts receivable because you are taking that month OFF of their record making it the same as if they paid it (you have dr accounts receivable but I believe you meant cr. Just wondering though because it makes no sense to me why you would add income from something you aren't earning income off of but instead lowering your income.

Please get back to me and Yashin on this please.

bhet

nope, cr rent income, the explanation for that is the cost revenue principle. rent income is creditted becasue it is the "sopposed to be income," if the lessor didnt gave any free rent.
since the lessor agreed to have a free rent, then that free rent would be charged against him as "amortization of rent discount ," it goes with the cost revenue principle. the amortization of rent discount is an expense.