The regular entry
Was 9/25 Rented a backhoe to Mission Landscaping at a price of $100 per day, to be paid when the backhoe is returned. Mission Landscaping expects to keep the backhoe for about two or three weeks.

For that I chose no entry was needed since there was no way to tell how long they kept it?

Adjusting entry says
As of 9/30 Duncan Corporation has earned five days' rent on the backhoe rented to Mission Landscaping on 9/25

My question is would I debit unearned rental fees for the 500 and credit rental fees earned for the 500 even though I did not record anything earlier?

As Morgaine300 mentioned in another post re this same question, as a practical matter Duncan's bookkeeper would probably just wait until the backhoe's returned in October, and then pick up all the marbles with a single journal entry then.

But it sounds like you're needing a Sep 30 adjusting entry, to do things 'by the book' (pun intended).

OK, as of Sep 30 Duncan has earned 5 days' worth of rent income on the equipment--because the lessee has actually used the equipment for 5 days during September. For that, Duncan will want to book (debit) a receivable, and credit earned rental fees, for the 5 days of rent.

Quote:

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Originally Posted by ArcSine

As Morgaine300 mentioned in another post re this same question, as a practical matter Duncan's bookkeeper would probably just wait until the backhoe's returned in October, and then pick up all the marbles with a single journal entry then.

But it sounds like you're needing a Sep 30 adjusting entry, to do things 'by the book' (pun intended).

OK, as of Sep 30 Duncan has earned 5 days' worth of rent income on the equipment--because the lessee has actually used the equipment for 5 days during September. For that, Duncan will want to book (debit) a receivable, and credit earned rental fees, for the 5 days of rent.

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I figured that out after thinking it through more but wouldn't that credit be to unearned rental fees not earned since the backhoe has not been returned nor has cash been received?

No. As of Sep 30 Duncan has earned 5 days of income, because the lessee has used the equipment now for five days.

It's the usage of the equipment by the lessee that determines the 'earning' of income by Duncan... not the payment of cash, nor the returning of the equipment.

Suppose you have the latest power bill sitting on your desk to be paid, and it's for the period that ran from July 10 to August 9. Even though you haven't written that check yet, would you say that the power company has 'earned' that fee? Absolutely... they earned it a little bit each day, from Jul 10 to Aug 9, as they were providing electricity to you each of those days.

Even though you haven't paid it yet, that same power bill is already on the power company's income statement as earned revenue.