Journal Entry - Rent in Advance

by Judy
(Jenkins)

Q: LaBouche Corporation owns a warehouse. On November 1, it rented storage space to a lessee (tenant) for 3 months for a total cash payment of $600 received in advance.


Journalize the entry for this transaction.

A:
The journal entry here would be:

Debit: Bank/Cash..................$600
Credit: Rent received in advance (liability).............$600


The income received in advance is a liability.

Here's an example of how to think with this. Let's say your friend gave you $100 to buy something for her from overseas in Europe. But you're only going overseas in 3 month's time. For those 3 months before you actually go to Europe and buy the product and give it to your friend, it's kind of like you owe her the money. Because you haven't fulfilled your side of the transaction yet... Make sense?

This kind of transaction is generally known as prepaid income or income received in advance.

Comments for Journal Entry - Rent in Advance

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Journal
by: Anonymous

cash A/c Dr
To Rent received in advance A/c cr

Request For Correct Answer
by: Anonymous

I want to learn with the correct answer by author (site)for all questions.It's really effectively.

journal
by: Anonymous

Cash Account - Dr.
To Le Brocher Account

liability
by: Anonymous

it is a liability account

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