Prepaid Rent T Account

Now we are in a position to study about Prepaid Rent T Account which is a form of Ledger. Previously, we already studied about, “Prepaid Rent Journal Entry”.

The Normal Balance of Prepaid Rent Account is Debit, however, when it increases, we Debit it and when it decreases, we Credit it.

Now, Let us prepare T account of Prepaid Rent by considering a simple example. Suppose, an entrepreneur acquired a Office Building on Rental Basis. The entrepreneur paid Rent Rs. 20000 on monthly basis. The entrepreneur paid Rent for 18 Months. Now, during the Current Accounting Period, the entrepreneur has used the benefits for 12 Months but for remaining 6 Months, the benefits are still not received by the business, so these 6 Months’s Rent is Prepaid Rent. We Record the following Accounting Journal Entries, when entrepreneur paid Rent For 18 Months as shown below:

(Assuming That The Prepaid Rent Initially Recorded As An Asset)

When Rent Paid:

                                     Prepaid Rent a/c 360000

 

                                                                 Cash a/c 360000

(Paid Rent (Rs. 20000 X 18) In Advance For 18 Months)

At The End of Current Accounting Period i.e., 31^st December, 2017, the following Adjusting Entry is passed:

                                           Rent a/c 240000

                                                       Prepaid Rent a/c 240000

(Rent of Rs. 240000 (20000 X 12) Received During Accounting Period)

After passing these Journal Entries, we can record these in the T Account of Business as shown below:

                                                                  ABC Entrepreneur

                                                             Prepaid Rent T Account

                                            For The Period Ends On 31^st December, 2018

                                   Rs.                                                                         Rs.

Cash a/c                 360000                                                  Rent          240000

Balance c/d            120000

 

The Closing Balance of Prepaid Rent (i.e., Rs 120000) is transferred To Balance Sheet and this balance will be the Opening Balance of the next Accounting Period.

You May Be Find This Article Helpful, “Adjustments In Final Accounts With Example”

So, it is very easy to prepare Prepaid Rent T Account.