Advance rent paid $1300 for 3 months. What is accounting entry?

Prepaid Rent   XXX

Cash                       XXX

In the first3 months it would be,

Prepaid rent (Asset)     DR $/3

Cash/Bank                                            CR $/3

In the month of rent payment, it would be,

Rent Expense             DR $

Prepaid rent                                           CR $

Prepaid Rent

Cash/Bank

_________

Rent Expenses

Prepaid Rent

Prepaid Rent                                                                              

Cash                                                                                                                  

Dr. RENT $

CR. Cash/Bank $

Excellent answer by Smitha Manoj so,  I go with her.

There are two possible situations

I) If the advance rent is paid during the financial year.

Rent a/c. - Dr.

To Cash a/c.

ii) If the rent is paid at the time of end of financial year then we will pass the entry for rent payment and then we will transfer the amount of rent which we had paid in advance to the prepaid rent a/c.

Rent a/c  - Dr 

To Cash a/c

Prepaid Rent a/c - Dr

To Rent a/c.

the effect will be it will be deducted from rent a/c in profit & loss account and will be shown in asset side of balance sheet in current asset.

Dr. Advance rent  $1,

Cr. Bank / Cash               $1,

After three months Prepayment will be expense out e.g.

Dr. Rent, rates and taxes   $1,

Cr. Advance rent / Prepayments    $1,

In the3month Advance rent paid would be....

       Prepaid Rent Account.....DR........      $0

        Cash Account              ...............CR                     $0

The Accounting Equation, Assets = Liabilities + Owners Equity

It depends. If the Company is following expense method of recognition, it will be debited to Rent Expense. If the Company is following asset method. The debit would be Prepaid Rent.

However, if the3 month period will fall within the same accounting period. It is advisable to debit the total amount to expense. No adjusting entry will be needed at the end of the period since the three months are occurred during the same period.

Depending on :

1- The three months are in the same fiscal year or not .

2- The company prepares monthly or quarterly financial statements or not .