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    tidianform's Avatar
    tidianform Posts: 1, Reputation: 1
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    #1

    Aug 19, 2009, 05:40 AM
    Perpetual Inventory Method involving rent.
    Can anyone tell me how should I enter rent into general journal when it is like this,

    The following transactions relate to xxx for the 'WEEK' ended 7 Feb 20X9

    2 Feb, Signed a three-year lease of premises, and paid three months' rent in advance, $18000 plus 10% GST.

    So... I have to form income statement and it calculated a loss it doesn't make sense as rent expenses are too high 18000. Should I change it to per month 6000 or per week 6000/4?.

    tidianform
    moonfruit's Avatar
    moonfruit Posts: 7, Reputation: 1
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    #2

    Aug 19, 2009, 09:56 AM

    U have to creat a an account "prepaid rent 18000, as an Asset.

    Prepaid rent Dr. 18000
    Cash Cr. 18000

    Then you can charge rent according to your accounting period.

    If you are preparing your income statement monthly. Then you can charge only one month rent, not as a whole. Remember the Matching Princple of accounting. Only those expenses have to charge to income statement which belong to that period only.

    Now the second entry will b.

    Rent expense Dr. 6000
    Rent Expense Cr. 6000
    moonfruit's Avatar
    moonfruit Posts: 7, Reputation: 1
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    #3

    Aug 19, 2009, 10:01 AM
    OPS SPELL MISTAKE

    u have to creat a an account "prepaid rent 18000, as an Asset.

    Prepaid rent Dr. 18000
    cash Cr. 18000

    then u can charge rent according to ur accounting period.

    if u r preparing ur income statement monthly. then u can charge only one month rent, not as a whole. remember the Matching Princple of accounting. only those expenses have to be charged to income statement which belong to that period only.

    now the second entry will b.

    rent expense Dr. 6000
    Prepaid Rent Cr. 6000

    and the remaining Prepaidrent account (18000-6000=12000) will go to Balance Sheet as an current asset

    Quote Originally Posted by moonfruit View Post
    u have to creat a an account "prepaid rent 18000, as an Asset.

    Prepaid rent Dr. 18000
    cash Cr. 18000

    then u can charge rent according to ur accounting period.

    if u r preparing ur income statement monthly. then u can charge only one month rent, not as a whole. remember the Matching Princple of accounting. only those expenses have to charge to income statement which belong to that period only.

    now the second entry will b.

    rent expense Dr. 6000
    Rent Expense Cr. 6000
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