Ad-Free CAclubindia and Daily Updates on your mobile. Subscribe Now!

Journal entries of rent paid

Ankit Chauhan (Accountant) (41 Points)

16 January 2017

If I have two companies abc and xyz if abc pay rent for xyz then what if the treatment in the accounting books of both companies. what are the journal entries in the books of both companies

Reply
Follow
Share

10 Replies

Rohit Raghuwanshi (Article Assistant) (31 Points)
Replied 16 January 2017

in the books of ABC
RENT A/C..........Dr.
To BANK A/C
in the books of XYZ
BANK A/C........Dr.
To Rent A/C

1 Like

Upgrade to CAclubindia Pro. Subscribe Now!

Suresh Pai S (Tax Consultant) (1029 Points)
Replied 16 January 2017

Follow the accrual basis.
1)In the books of the tenant.
a)Rent A/dr
To lessee company
(When the rent is accrued)
b)Lessee company ac dr
To Bank/cash
(Being rent paid)
2)In the books of the landlord
a)Tenant a/c dr
To rent
(When the rent accrues)
b)Bank/Cash A/c dr
To tenant's A/c
(Being rent received)

Baljeet Singh (CA, B.Com (H)) (954 Points)
Replied 16 January 2017

I think what Ankit has asked is that what to account for when Company 1 pays rent on behalf of Company 2, and the rent paid is to some third party.

In that case:

Company 1 will record-

Company 2 A/c ...........Dr.

To Bank A/c

(Being payment made on behalf of Company 2)

Company 2 will record:

Rent A/c..........Dr.

To Third Party A/c (Landlord)

(being rent due for the month)

Third Party A/c (Landlord).........Dr.

To Company 1 A/c

(On rent paidby Company 1, thus company 1 becomes the creditor for company 2.

Company 1 A/c......Dr.

To Bank A/c

(Being payment made/reimbursed to Company 1)

4 Like

Suresh Pai S (Tax Consultant) (1029 Points)
Replied 16 January 2017

Yes. Baljeet is right. I didn't notice that. You can take his answer and ignore my answer.

Ankit Chauhan (Accountant) (41 Points)
Replied 16 January 2017

I means abc co. pay rent on behalf of xyz

Upgrade to CAclubindia Pro. Subscribe Now!

Ankit Chauhan (Accountant) (41 Points)
Replied 16 January 2017

Thanks Baljeet sir

Praveen Kachhawa (Financial Accountant) (225 Points)
Replied 16 January 2017

In the books of abc

XYZ dr.

To Bank/cash

( rent paid for xyz company)

In the books of xyz

Rent to landlord DR.

To ABC

( rent paid by abc company for month..)

Puneet Taneja (Finance Professional) (1149 Points)
Replied 01 September 2020

In the Books of ABC

XYZ A/c.........Dr

To Bank A/c

(paid on behalf of XYZ)

In the Books of XYZ:

Rent A/c ....Dr

To ABC a/c

(Rent expense paid by ABC on our behalf)

ABC a/c ......Dr

To Bank a/c

(Paid to ABC)

shahyar husain (1235 Points)
Replied 05 December 2020

The initial journal entry for prepaid rent is a debit to prepaid rent and a credit to cash. These are both asset accounts and do not increase or decrease a company's balance sheet.

shahyar husain (1235 Points)
Replied 14 December 2020

The initial journal entry for prepaid rent is a debit to prepaid rent and a credit to cash. These are both asset accounts and do not increase or decrease a company's balance sheet.