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the owner of a company had paid the rent from Jan’11 to sept’11. But he didnt pay the rent for 2 months oct and november. On Dec 6,2011 he issued 4 cheques (one current dated and three post dated 14/1/12, 14/4/12, 14/7/12 ) each of value 76294(rent for three months, monthly rent 25431) for the period 14/10/11 to 13/10/12 . How should this be treated for the months of oct and nov for which no rent was paid. Entries pls.
Hello!!!
When the cheques are issued the entries for the cheques are simple as
Prepaid Rent A/c DR 76294 and Credit Bank A/c
the same entry would be repeated for each cheque.
Tip: No matter the cheque is current dated or post dated the entry remains the same because in your books it stands paid.However as far as the accounting entries for October and November are concern. At each month closing there was an accrual recorded for respective month rent e.g.
Rent expense A/c Dr. 25,431 and Credit Rent Payable A/c 25,431
similar entry is required for November. However the rent of December is paid within December along with the rent of October and November so the accounting entry for the cheque as current dated in December
the entry would be:
Rent expenses A/c Dr. 25,431
Rent Payable A/c Dr. 50,862 (The accrual of October and November Rent)
Bank A/c Cr. 76,294Hope it resolved your problem.
Thanks
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