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Journal Entry Please

Srik (9 Points)

17 July 2021

Journal Entry required-Scenario is-My Company's Rent for year 2020 is $120,000/-.I received the invoice from Real Estate on 5th Jan 2020.But I will be paying the entire $120k only on 10 of April-2020.Can someone help me with the complete journal.

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11 Replies

Balamurali Unnithan MS (STUDENT) (1631 Points)
Replied 17 July 2021

1st Entry on 5th Jan 2020 is

Rent Payable (Current Liability ) Dr
Company Name (Building Owner) Cr

2nd Entry on 10th April 2020 is

Rent Paid Dr
Rent Payable Cr

Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294) (3293 Points)
Replied 17 July 2021

As soon as you received invoice from real estate the entry will be

Rent payable account debit

Real estate name account is credit with entire amount120000

when you actually paid to real estate then the entry will be

Real estate account debit

Bank account credit with the entire amount 120000

Srik (9 Points)
Replied 17 July 2021

I have a question here-So for the month of Jan,Feb March- shouldn't the payment of 10k each be shown on my income statement??

Balamurali Unnithan MS (STUDENT) (1631 Points)
Replied 17 July 2021

Means your P&L Account?

Srik (9 Points)
Replied 17 July 2021

Yes Sir-Because for the month of Jan Feb and March (Monthly rental is10k) (10k is supposed to be paid but it is not paid and it is due) .So how should that is to be shown as an expense in the P and L,how is that to be shown.

Thanks

Balamurali Unnithan MS (STUDENT) (1631 Points)
Replied 17 July 2021

Yes, Ji,

As per 145(1) -Assesee can maintain a cash /mercantile system of accounting regularly.

If you maintain books of accounts on a mercantile / due basis - you can claim the same in the P&L

Ji, You understand...

Srik (9 Points)
Replied 17 July 2021

Oh Ok,Thank for that information Sir.So could you let me know what entry should be passed in feb and march with regard to the rent expense which effects the P and L.

Thanks so much for your assitance and quick response.

Balamurali Unnithan MS (STUDENT) (1631 Points)
Replied 17 July 2021

Most Welcome Ji,

The entry is

Rent Payable (Current Liability ) Dr Company Name (Building Owner) Cr.

aswinsachu07@gmail.com (7 Points)
Replied 17 July 2021

I have a doubt sir.. if rent payable account is a current liability then how come we will debit that

Srik (9 Points)
Replied 18 July 2021

Hi,Sir,

Sorry,but this is confusing me more now.Is this entry the first entry when the invoice is received and if yes, could you post the entry which will take place in End of Jan,Feb and March towards the Rent Expenses of (USD 10000/-) (Which should effect the P and L).Also, as Mr Ashwin has stated I dont understand How the payable entry comes in as a Current Liability.

Thanks for your support.