Advance rent

rent advance is current liability is it correct or not
Replies (6)
Quick Summary
This discussion clarifies whether rent received in advance is considered a current liability. The consensus is yes, as it represents unearned income. It explores the accounting entries, differentiating between advance payments for services not yet rendered (deferred revenue) and payments for already provided services. The impact on tax planning and the substance over form principle are also touched upon.

Yes , rent received in Advance is Liability . 

But rent received in advance for an existing customer 

Dr. Bank

Cr. Rental income

When the due date is over shucks there is no entry and so its deferred revenue. So a bank can have a contra entry called advance bank payments

Dr. Advance bank account

Cr. Rental income 

After due date

It can be

Dr. Bank

Cr. Advance bank account

Substance over form. Whats the difference? You already rented it and you didnt promise them good or service whilst you already provided it and received advance payment.

So deferred revenue is only for services which werent provided yet. 

 

 

 

 

If you make entries like

Dr. Bank

Cr. Deferred revenue liability

And after due date you change it to

Dr. Deferred revenue liability 

Cr. Rental income

 

It didnt make any difference? Besides an accrual entry is missed on the income statement. Now someone who knows tax planning will understand the impact of it. 

The replies are just confusing.

Question - rent advance is current liability is it correct or not

Answer - yes

Ca Raj Doshi

Revenue received or billed should be deferred and recognised either on a
straight line basis over time or, where the items delivered vary in value from
period to period, revenue should be based on the sales value of the item
delivered in relation to the total sales value of all items covered by the
subscripttion.

There is nothing else in thos standard. Does it say deferral is a liability?

Answer: No

My first double entries also work. 

Agreed

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