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Outstanding Rent Is W hich Type Of Accou nt? Accrued Rent / Rent Payab le / Outstanding Rent is not a N ominal Account as it is not closed to Income Statement w hile a nominal account always closed for t he accou nting period. Outstanding rent is also not a real account as it is related wit h representative personal account. So, outstanding rent is a Representative Personal Account, w h ic h is a type of personal account, as it is used to s how all of the certai n landlords or owners to w hom the compa ny is liab le to pay re nt during t he accou nting period. All of t he re nt for various mont hs are added up a nd we give a name of “Outstanding Rent Account” to represent all of t h ese rent accounts as it is payab le to certai n la ndlords. T hus, outsta nding rent stands for all of t he la ndlords or owners to w hom the b usi ness did not paid rent during t he mo n th.   So, outstanding rent is considered as a personal account and not a nominal or a real account.

Si nce Discount Account is an indirect expense, so it is not a Real Account as real accounts are related to permanent accounts w hi c h are not closed to Income Statement. T hese accou nts havi ng b ala nces w hich are tra nsferred to b ala nce s heet at the e nd of t he accou nting period. Discount account is also not a personal account w hich is dealt with livi ng or natural persons, artificial and representative personal account. However, discou nt account is a nominal account as nominal accounts (Revenues, Expenses, Gains & Losses) or temporary accounts are closed at t h e end of t h e accounting period. For example, trade discount and discount allowed are indirect expenses w h ile discount received is an indirect income so t h ese are considered as nominal accounts w hich are fi nally closed to I ncome Statement for t he accou nting period. So, we can say t hat discou nt account is a nominal account and not real account and personal account.

  Balance Sheet Accounts are also called Permanent Accounts or Real Accounts as t hese accou nts are not closed and transferred to b ala nce s heet at the e nd of t he accou nting period. Bala nce s heet accou nts include Assets, Liab ilities a nd Owner’s Equity or Equity. All t he temporary accou nts (Expenses and Revenues are not included on b ala nce s heet accou nts. However, the differe nce b etwee n revenues and expenses i.e., net Income or net Profit is added and net Loss and dividend is deducted from owner’s equity or equity account in order to calculate ending equity.

  Balance Sheet Accounts list includes all Assets (b oth Curre n t Assets a nd  N on Current Assets / Fixed Assets), All Liab ilities (b oth Curre nt Liab ilities a nd non Current Liab ilities / Lo ng-Term Liab ilities) a nd Owner’s Equity or Equity. Here are some importa nt b ala nce s heet accou nts list s how n on t he b ala n ce sh eet. Current Assets include Cas h, Cash Equivalents, Accou nts Receivab le (Sundry Debtors), Inventory / Stock / Merchandise, Prepaid Expenses / Accrued Incomes or Revenues such as Prepaid Rent, Commission Paid In Advance, etc. Fixed Assets / Non Current Tangible Assets i nclude Plant & Mac hi nery, Furniture & Fixtures, Land & b uildi ng, Office Equipment, etc. Intangible Assets such as Patents, Franchises, Copyrights, Licenses,Goodwill, etc. Curre nt Liab ilities i nclude Accounts Payab le / Su ndry Creditors, Accrued Salaries, Unearned Commission, Outsta nding Rent, S hort-Term Borrowi ngs, etc. Long-Term Liab ilities i nc

  In Accounting, b ala nce s heet accou nts are Permanent Accounts i.e., accounts havi ng b ala nces and are not closed like temporary accounts and at t h e end of t h e accounting period, t hese accou nts are transferred to b ala nce s heet o n a specified date of time. Bala nce s heet accou nts include Assets, Liab ilities a nd Owner’s Equity or Equity Account. T hese accou nts are finalized in Post-Closing Trail Balance b efore the start of the new accounting or fiscal year. Bala nce s heet accou nts are also called Real Accounts as Assets and Liab ilities are related with real accou nts. Major Lists / Examples of  Bala nce S heet Accou nts are Cas h, Accou nts Receiva ble, I nve ntory, Fur niture & Fixture, Pla nt & Mac hi nery,  Accou nts Paya ble, Loa ns, Ow ners' Equity, S hareholder's Equity  etc.

Current Assets   are usually or normally listed / recorded on b ala nce s heet i n order of liquidity i.e., t hese are listed i n order of t h e most Quick Assets / Liquid Assets Lists or w h ic h are convertib le i nto cas h very quickly a nd t he n ot her assets will come which is less liquid tha n the previous asset. These assets are easily used to receive or pay cash i n order to earn revenues or meet daily expenses for running daily b usi ness operations. Curre nt Assets Lists in t h e order Liquidity are s how n b elow: 1. Cas h 2. Cash Equivalents 3. Accou nts Receivab le (Sundry Debtors) 4. Inventory / Stock / Merchandise 5. Prepaid Expenses / Accrued Incomes or Revenues 6. A ny Ot her Assets

  Accrued Re nt is a Current Liab ility for th e b usi ness (tenant’s b usi ness) w hich receives re nt facilities from rental company or landlord or owner during t he accou nting period. Accrued Rent is a Current Asset for landlord, owner or rental company’s b usi ness as it considers it as a revenue w hich is ear ned it during t he accou nting period b y providi ng services to tenant  b ut still the payme nt is not received from tenant. Accrued Rent Adjusting Entry For Tenant’s  B usi ness:                                           Rent Expense a/c  XXX                                                                           Accrued Rent a/c  XXX                                                   (Rent Expense Accrued for t he Period)   For La ndlord, Owner or Rental Company’s  Busi ness                                               Accrued Rent a/c  XXX                                                                              Rent Revenue a/c  XXX        

  T he closi ng entry process is necessary in order to close all Temporary Accoun ts or N ominal Accounts  at t he end of  t he accou nting period and he nce all revenues and expenses h ave zero ledger’s b ala nces at the e nd of t he accou nting period. T he purpose of closi ng entry is to close all t h e expenses and revenues accounts and transfer t h e net profit or net income and retained earning to owner’s equity or equity account in order to calculate t h e finalized value of closing owner’s equity or closing equity account. When Closing Entries Are Made? T h e time to record Closing Entries is after t he preparatio n of completed Financial Statements in order to ensure t hat all the temporary accou nts are closed i.e., t h ese h ave zero or nil ledger’s b ala nces and permanent accounts left in t he compa ny b usi ness’ b ooks of accou nts b efore the start of the new fiscal or accounting period.

  Prior to the adjusti ng process, Accrued Revenues have been earned but not recorded as revenues as these are ear ned b y the b usi ness b y deliveri ng goods to customers or rendered services to clients or customers but still t hese are not recorded in relevant ledger’s accounts. For example, Accrued Rent is an income receivab le for the compa ny as t he compa ny provided rent facilities to tenant during t he accou nting period b ut the payme nt is still not received from tenant against suc h facilities. The accrued reve nue adjusting entry is recorded at t he e nd of t he accou nting period as s how n b elow:                                       Accrued Re venue a/c  XXX                                                                              Revenues a/c  XXX                                                         (Revenues Accrued for t he Period)     Accrued reve nus is a current asset and s how n on t he b ala nce s heet.

  Prior To The Adjusti ng Process, Accrued Expe nses have b ee n incurred b ut not paid and recorded in t he B o oks of Accou nts . T he adjusti ng entry is recorded at t he e nd of t he accou nting period is s how n b elow:                                     Expe nses a/c  XXX                                                             Accrued Expenses a/c  XXX                                                      (Expenses Accrued for t he Period)   For example, Accrued Salaries of Rs. 50000 shows those salaries which are not paid to employees b ut these are i ncurred b y the b usi ness for t h e period as t h e b usi ness received t h e b e nefits or services for t h e mont h b ut th e payment is not made to employees, so it is a current liab ility of th e company’s b usi ness to pay to t h em for t he services re ndered to company b y employees for the mo nt h. Accrued expe nses are current liab ilities a n d show n on b ala nce s h eet.

Both Accou nting and Auditing work under proper maintaini n g and c hecki ng of Books of Accou nts . Accounting and auditing procedures, standards, rules and principles are prepared in order to provide professional skills to various organizations (profit maki ng i nstitutions or non profit organizations). Both accou nting and auditing interact wit h each other for proper mai n tai ning and c hecki ng of b ooks of accou nts for t he successful ru nning of b usi ness b y avoidi ng mistakes, errors and frauds. Both use computer software to work efficie ntly and effectively without losi ng muc h time i n preparing and c hecki ng of b ooks of accou nts wit h true, relia b le a nd accurate information useful for Users of Financial Statements . Both have great importa nce in t he field of b usi ness as wit hout proper keepi ng and c hecki ng of b ooks of accou nts, t h e b usi ness resources may not b e utilized efficie ntly and effectively to meet b usi ness’s financ

  Accumulated Depreciatio n is a Contra Asset Account and normal or usual or favourab le or positive b ala nce is credit w hile negative or unfavourable   b ala nce is deb it. Actually, accumulated depreciatio n is deducted from relevant fixed assets on b ala nce s heet i n order to calculate t he b ook value or writte n down value of fixed assets. For example, accumulated depreciation a nd depreciation for the year  on building is Rs. 50000 duri ng  t he first accounting period. Depreciation for t he year is a n estimated expe nse w hic h is recorded i n I ncome Stateme nt or Profit a nd Loss Accou nt w hile  Accumulated depreciation  is deducted from the origi nal cost of  buildi ng  in order to calculate t he   b ook value or writte n down value of b uildi ng w hic h is  here as  Rs. 450000  (500000 - 50000)  w here as  original cost of  buildi ng is  Rs. 500000 . The adjusting entry to record the depreciation of a building for the fiscal period is s how n b el

  Prepaid Expenses or Expenses Paid In Advance required adjusting entry according to Matc h ing Concept Gaap as revenues of t h e same period must b e match ed wit h t h e expenses of t h e same period incurred in earning t h ese revenues. If we initially recorded as prepaid expense and later on, w he n we received services or b e nefits against t h e payment, we deb it releva nt expense account e.g., Ren t Expense Account and credit Prepaid Ren t Account w hich is expired for that particular accou nting period. So, we matc h re nt expense account wit h the re venues of t hat specific accou nting period b y recordi ng rent expense account in Income Statement. T h e entry is s how n b elow:                             Prepaid Expe nses a/c  XXX                                                                 Cas h a/c  XXX                                        (Expenses Paid In Advance For t he Period)   Whe n we received a portion or w h ole part of b e nefits