Deferred Rent Receivable vs. Straight Line Rent

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Deferred rent receivable and straight line rent both have their fair share of advantages and disadvantages as practices. Learn about deferred rent receivable versus straight line rent with help from a longtime and experienced accountant in this free video clip.

Part of the Video Series: Understanding Finance & Accounting
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Video Transcript

Hi, I'm Lori Greer from Atlanta, Georgia, and I'm here to discuss deferred rent receivable versus straight line rent. The cumulative difference between the rental income or payments required by a lease agreement and the rental income or expense recognized on a straight line basis or other systematic and rational basis, more representative of the time pattern in which use or benefit is granted or derived from the lease property, expected to be recognized in income or expense by the lessor or lessee respectively, more than one year after the balance sheet date. Such receivables should be reduced by allowances attributable to for instance, credit risks associated with a lessee. Straight line rent uses the same principle assuming rent costs are standard for the life of a lease, as that of a straight line accounting method that provides a means to evenly spread costs over a fixed length of time, often used when determining depreciated value of an asset, straight line depreciation assumes an asset's value decreases steadily throughout its useful life rather than loses its value unevenly in a bell curve type mode. I'm Lori Greer from Atlanta, Georgia, and that's the difference between deferred rent receivable and straight line rent.

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