Advance rent
gaddala ramesh (163 Points)
23 May 2023
rent advance is current liability is it correct or not
6 Replies
prasad Nilugal
( GST Practitioner & Accounts )
(14801 Points)
Replied 23 May 2023
Yes , rent received in Advance is Liability .
Yasaswi Gomes new
(Finance )
(4514 Points)
Replied 24 May 2023
But rent received in advance for an existing customer
Dr. Bank
Cr. Rental income
When the due date is over shucks there is no entry and so its deferred revenue. So a bank can have a contra entry called advance bank payments
Dr. Advance bank account
Cr. Rental income
After due date
It can be
Dr. Bank
Cr. Advance bank account
Substance over form. Whats the difference? You already rented it and you didnt promise them good or service whilst you already provided it and received advance payment.
So deferred revenue is only for services which werent provided yet.
Yasaswi Gomes new
(Finance )
(4514 Points)
Replied 24 May 2023
If you make entries like
Dr. Bank
Cr. Deferred revenue liability
And after due date you change it to
Dr. Deferred revenue liability
Cr. Rental income
It didnt make any difference? Besides an accrual entry is missed on the income statement. Now someone who knows tax planning will understand the impact of it.
CA Raj Doshi
(Practising CA)
(8924 Points)
Replied 26 May 2023
The replies are just confusing.
Question - rent advance is current liability is it correct or not
Answer - yes
Question - rent advance is current liability is it correct or not
Answer - yes
Yasaswi Gomes new
(Finance )
(4514 Points)
Replied 26 May 2023
Ca Raj Doshi
Revenue received or billed should be deferred and recognised either on a
straight line basis over time or, where the items delivered vary in value from
period to period, revenue should be based on the sales value of the item
delivered in relation to the total sales value of all items covered by the
subscripttion.
There is nothing else in thos standard. Does it say deferral is a liability?
Answer: No
My first double entries also work.
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