If we issue half year PDC to a supplier for rent, so can we book 6 months expense in the first month? Does this violate accrual basis of accounting??
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Rent paid in advance
Replies (6)
Yes it will violate. Since post-dated cheque can't be cleared before its date, hence it is not prepaid or advance rent. So, record it on date of the cheques. These dates will determine whether its current expense or advance/prepaid rent.
The PDC is we treated as advance or pending amount from creditors., its not reflect in expenses., whether the payment received or not we have to book the expenses once its done or month end.
Thanks a lot, but can u tell me about expense? For eg: i gave one cheque on 1st jan and cheque date is also 1st jan so by this can i book the six month rent in jan?? if i am giving 2 pdc for a year.
thanks a lot
You give Jan to June rent in Jan. If are preparing your balance sheet in March. You have 3 months of advance rent paid, which is shown in balance sheet. These are the final adjustments considered while preparing financials. If you charge it as expense in Jan, then in March you'll have to reverse three months rent and show it as prepaid/advance.
you can pass the entry based on expenses not payment ., the payment you can treat as advance from vendor like that
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