My company received two months free rent.
I know that this free rent has to be amortized. But do not know exactly when and how to record this free rent.

What journal entry should I make to record that free rent amortization?
Can you suggest any accounting book that shows exactly how to record a free rent trasactions on the Leasees book.

Thank you very much.

I suggest you get a copy of international acounting standards (IAS). It will tell you what to do about accounting and everything about accounting.

So what are we talking about here?

You pay for rent from Jan-Oct and they give you Nov and Dec for free?

Let's say that you paid 1,000 a month.

In Jan-Oct, the JE would be:
Dr. Prepaid Rent 167
Dr. Rent Expense 833
Cr. Cash 1,000

In Nov and Dec, it would be:
Dr. Rent Expense 833
Cr. Prepaid Rent 1,000

It is off by a few dollars do to the fact I rounded.

So what are we talking about here?

You pay for rent from Jan-Oct and they give you Nov and Dec for free?

Let’s say that you paid 1,000 a month.

In Jan-Oct, the JE would be:
Dr. Prepaid Rent 167
Dr. Rent Expense 833
Cr. Cash 1,000

In Nov and Dec, it would be:
Dr. Rent Expense 833
Cr. Prepaid Rent 1,000

It is off by a few dollars do to the fact I rounded.


If you make your entry on nov or dec, I think your trial balance won't balance. The debit would be understated by 167. ;)

I think it would be better like this.

For example if the lease term is 5 years and 2 months free rent.

Initial entry:
dr. prepaid rent 5000
Cr. Cash 4500
Cr. Rent disc 500

Adjusting entry:
dr. rent expense 900
dr. rent disc 100
Cr. Prepaid rent 1000

Amortize the rent disc over the lease term.

You are right, I typed the wrong number.

I should have typed..
In Nov and Dec, it would be:
Dr. Rent Expense 833
Cr. Prepaid Rent 833 (not 1,000)