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the owner of a company has issued 3 post dated cheques 14/1/2011, 14/4/2011 and 14/7/2011 respectively for the rent from jan 14 to sept 14 from his personal account. Each cheque is for 76294.(for 3 months) How should this be accounted., The entries pls?
ThanksThe checks are prepaid . If each check is for 76294 this means we have 76294/3=25431 per month for rent.
The entry for each check is :Debit rent expense 25431
Debit prepaid account 50863
Credit bank account 76294ramonacraciun , thanks buddy, i need a little more clarification regarding the entries for rent each month,
The entries would be:
at 14th Jan:
Dr. rent exp 25431
Dr. prepaid expense 50863
Cr. Bank A/c 7629414th Feb:
Dr. rent exp. 25431
Cr. Prepaid expense 2543114th March:
Dr. rent exp. 25432
Cr. Prepaid expense 2543214th April:
Dr. rent exp 25431
Dr. prepaid expense 50863
Cr. Bank A/c 7629414th May:
Dr. rent exp. 25431
Cr. Prepaid expense 2543114th June:
Dr. rent exp. 25432
Cr. Prepaid expense 2543214th July:
Dr. rent exp 25431
Dr. prepaid expense 50863
Cr. Bank A/c 7629414th August:
Dr. rent exp. 25431
Cr. Prepaid expense 2543114th Sept.:
Dr. rent exp. 25432
Cr. Prepaid expense 25432on 14th Jan, you sent a cheque for 76294, right. But from this amount, 25431 relates to your period, which should obviously be expense out as a rent, and the remaining amount of 50863 not relates to your period, and for which you have paid in advance, so that would be your prepaid expense and be shown as an asset in your balance sheet.
then for each subsequent period, you would expense the amount relating to your period from the prepaid expense account.
i hope that matter would be fully clarified now.
Shayan, one more doubt, what happens if another set of three post dated cheques are given, covering nine months from sept. Coz in forum i read that PDC should be treated as Accounts Receivable in the balance sheet.. Should i record only one cheque that covers oct to dec, or should other two cheques also and if so, at what dates ?
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