Before starting with the main discussion, let me give you a brief explanation of what rent received is When a business or an organization rents out its unused property to earn some extra income and receive some amount from it, that amount of money is said to be rent received. Rent can be monthly, quRead more
Before starting with the main discussion, let me give you a brief explanation of what rent received is
When a business or an organization rents out its unused property to earn some extra income and receive some amount from it, that amount of money is said to be rent received.
Rent can be monthly, quarterly, half-yearly, or yearly rent depending upon the organization’s agreement.
The journal entry for rent received will be
Here, Cash account is debited due to the increase in assets or because of a real account. Rent account is credited due to the increase in income or because of the nominal account.
However, Rent received in advance means the amount of rent that is not yet due but is received in advance. It is treated as a current liability because the benefit related is yet to be provided to the tenant.
The Journal entry for Rent received in advance will be-
Here, rent is debited due to a decrease in income.
Rent received in Advance is credited due to an increase in liability.
For Example, Johnson company rented out a part of its building that was not used to earn some extra income from it. The monthly rent was fixed as 20000. Johnson company follows calendar year as their accounting year. The tenant, therefore, paid 4 months advance rent to Johnson company i.e. the tenant in January gave his advance rent for February, March, April, and May.
While receiving the rent in the month of January. The journal entry would be
Now, the adjustment entry of rent received in advance would be
The rent received in advance will also be posted individually in each month of February, March, April, and May as
Furthermore, Rent received in advance is deducted from the amount of rent in the income and expenditure account and thereafter the amount received in advance is posted on the liability side of the Balance sheet.
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Debit balance means excess of credit side over debit side. For Example- At the beginning of the year the debit balance of trade receivables is 3,000 and there is a decrease(credit) of trade receivables of 1,000 during the year and an increase(debit) of trade receivables of 4,000 then at the end therRead more
Debit balance means excess of credit side over debit side.
For Example- At the beginning of the year the debit balance of trade receivables is 3,000 and there is a decrease(credit) of trade receivables of 1,000 during the year and an increase(debit) of trade receivables of 4,000 then at the end there will be a debit balance of 6,000 of trade receivables at the end
A Debit balance basically signifies all expenses and losses and all positive balances of assets. The debit balance increases when any asset increases and decreases when any asset decreases.
Assets
All the assets that appear in the balance sheet always have a debit balance. The debit balance under it will increase as it debits. Some of these assets can be illustrated below -:
Expenses and Losses
All expenses that appear on the debit side of the P&L account have a debit balance in their accounts.
For eg-: A rent of 10,000 is given to the landlord under which the work has been done by the entity.
For eg-: A depreciation of 10% is there on an asset of 12,000 will result in a debit balance under depreciation in the P&L Account.
Some of the following expenses can be illustrated below
So after seeing all the above points we can conclude that the debit balance includes all the expenses that are in the P&L account and all the assets that are there in the Balance sheet. So its balance increases when there is an increase in its account.
CREDIT BALANCE
Credit balance means excess of credit side over debit side.
For example, At the beginning of the year, the credit balance of trade payable is 3,000 and there is a debit of trade payable of 1,000 during the year and an increase(credit) of trade payable of 4,000 then at end there will be a credit balance of 6,000 for trade payable at the end
.A Credit balance signifies all income and gains and all liabilities and capital that is there in business.
Liabilities
Income and Gains