Dec. 1. Company pays for December 2008 and January 2009 rent. How do I journalize this transaction? Do I use rent expense for December and prepaid rent for January?

Let us assume Rent is $100 a month.


On Dec. 1, the JE is
Dr. Prepaid Rent 200
Cr. Cash 200

This JE is made because you have prepaid 2 months rent, for the MONTH of Dec and Jan.


Now, on Dec. 31, one of the two months have been used up. Therefore the JE would be:
Dr. Rent Expense 100
Cr. Prepaid Rent 100

Now, on Jan. 31, the second month is used up, so the JE would be:
Dr. Rent Expense 100
Cr. Prepaid Rent 100


You will also note that after Jan. 31, the balance in the Prepaid Rent account is 0, as you have used it all up, and its all been put into Rent Expense.