What Type of Journal Should Be Used to Record Paid Rent Expenses?

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Accounting requires the use of different journals to properly account for business transactions. Each journal contains specific information on transactions. Common journals include general, cash, receivables, payables and many others, based on a company’s operations. Rent expenses may fall under the general or cash journal guidelines, depending on the company’s accounting policy.

Defined

Rent is typically a monthly expense an accountant records to indicate a company’s payment for use of facilities. The general journal contains this information because the entry may not relate to any other journal. A company may require accountants record the rent journal entry in the cash journal if the rent amount is small or the cash payment for rent is part of a two-entry process.

Journal Entries

Journal entries are representations of business transactions. Accountants record the entries into the journals when the event occurs in a business’ normal operations. In a single journal entry system, accountants debit rent expense and credit cash. Under a two-entry system, accountants debit rent expense and credit rent payable. The second entry debits rent payable and credits cash. The latter entry may go in the company’s cash journal.

Reporting

Rent expense goes on a company’s income statement, under the expense section. Rent payable is a liability, falling under the company’s balance sheet. The liability will only be on the balance sheet if a company carries the entry past month end. For example, an accountant may record the payable entry at month end with the expectation to pay rent in the subsequent month.

Considerations

In today’s automated business environment, companies may pay rent using an automatic payment system through their bank. This avoids cutting a check and sending rent payments through the mail. Accountants often record automatic debit payments at month end. This avoids copious journal entries during the month. Large organizations may record these entries on a daily basis if they have several rent payments or bank accounts to manage.

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References

  • "Fundamental Financial Accounting Concepts"; Thomas P. Edmonds, et al.; 2011
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