What is Outstanding Rent - Journal Entry
Outstanding Rent Definition And Meaning / Rent Payable Definition And Meaning / What Is Rent Payable
Previously, we studied about Prepaid Rent, but here we will study about Accrued Rent or Outstanding Rent or Rent Payable from the point of view business which already enjoyed the benefit but still not paid expenses at the end of accounting period. Rent Payable is an example of Accrued Expenses.Outstanding Rent In Balance Sheet
When the company makes a rental agreement with Rental Company, then Rent paid by the company to Rental Company is based on Accrual Basis of Accounting i.e., at the end of Current Accounting Period, the company is liable to pay rent against the benefits enjoyed by it. As Expense (Rent) is not paid by the business at the end of Accounting Period, so it is a Current Liability and recorded in Balance Sheet.
Outstanding / Payable / Accrued Rent Expense Journal Entry
Example:- Suppose we paid Rent Rs. 15000 to Rental Company on Monthly Basis. The Rent Payable of Rs. 15000 for the Current Accounting i.e., October, 2018 is payable by the company to rental company and we can pay it before Due Date (let say on 5th November, 2018). or after Due Date. When Rent is accrued, then we need to pass following Adjusting Entry in the Journal of Business as shown below:
Rent Expense a/c 12000
Outstanding Rent a/c 12000
(Rent Rs. 12000 For The Month Outstanding)
At the start of November, the reversal of the above entry is created to cancel the affect of above adjusting entry. When the company actually paid the Rent for Cash or Bank. In that case, the following Entry is recorded:
Rent Expense a/c 12000
Cash a/c / Bank a/c 12000
(Paid Rent Rs. 12000)
Is Outstanding Rent An Asset?
It is not an Asset, but a Current Liability for the company which already enjoyed the benefits from the expenses not yet paid at the end of the Current Accounting Period.
Comments