Rent income recognition

A/c entries 1012 views 2 replies

My company has made a rent agreement and according to contract we will provide our hotel for eight months to another company and receive payments in three installments. The contract is signed and the first installment received at the time of signing the contract. I'm using the following method to record the contract in company books. All I wan to know is it valid according to IAS/IFRS

1- To Recognize complete contract:

Account Receivable Dr.1200000
Deferred Income Cr.1200000

2- To Recognize receipt of Installment:

Bank Dr.400000
Account Receivable Cr.400000

3- To Recognize the revenue at the end of month:

Deferred Income Dr.150000
Rental Income Cr.150000

Please guide me If I'm making a right entry according to IAS and IFRS

Replies (2)

You have said that the hotel will be rented out for 8 months & the installments will be received in 3 parts. So from each installment recd, whatever amount is related to current month shall be recorded as income and the remaining will be shown as Advance recd.

Entry would be as follows:

Bank A/c Dr     xxxxx

To- Rental INcome          xxxx

To- Advance Recd            xxxx

When the rent for the current month is due then the below entry would be posted:

Advnace REcd Dr    xxxxx

To-rental income                  xxxxx

However you can also post the entire amount to income, as the income would be pertaining to the same F.Y.  However if the contract is extending beyond the financial year then the entries as suggeted above will need to posted.

But how can we reord the agreement in our books? I understand that these entries should be posted. But I want to know that since the agreement has been made and even the first installment made can we record the whole contract in our books or will it be conflicting with IAS/IFRSs.


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