My daughter opened a beauty salon last June.

She paid a 3 months rent deposit (£2800.00) which she will get back in the end of the 3 years lease.

She got 3 months free rent to to some renovation work.

Can I categorize the deposit as rent and goes to the P&L as an expense or goes to the balance sheet as prepayments.
Thank you in advance

Thank you

Rui

A Prepayment is a current asset because you have not used the payment yet. When the payment is used it transfers from the prepayment account into the expense account.