Accounting for expenses such as rent, electricity, etc.

Keywords: Accounting for expenses such as rent, electricity, etc.

Such expenses usually don't require tracking payments to its suppliers, and they usually don't include taxes. So accounting of such expenses is very simple. Bob rented a kitchen on Jan 13 with equipment for 1000 USD per month. The document lease is the proof that says that the rent expense will occur on the last day of every month for 1000 USD even unpaid (accrual method).

Accounting of prepaid rent.

Bob prepaid 3000 USD for 3 months and made the accounting entries:

One month rent is occurred on Jan 31, so Bob will make the adjusting entries (transfer 1000 USD from prepayments into income (business) expense account 5150 Expenses.Rent):

Bob will make similar entries in February and March.

Accounting of unpaid rent.

Assume, in April Bob will not pay rent on time, so he will make the entries for occurred rent expense:

When Bob will pay rent for April, then he will make these accounting entries:

Debit "Accrued Payable.Rent" Credit "Cash In Bank" for 1000 USD

Accounting of rent that is paid on time.

When Bob will pay rent on time, then he will make these accounting entries:

Debit "Expenses.Rent" Credit "Cash In Bank" for 1000 USD

* If according to the law of your country a rent expense is required to be capitalized, then you should use the asset account 1210 Inventory Capitalized Cost.Rent instead of 5150 Expenses.Rent.