[slane]

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.

[bhet]

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

[CaptainForest]

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.

[bhet]

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.

[CaptainForest]

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)