Accrued rent expense journal entry
Overview
Under the matching principle of accounting, the expense should be recognized when it incurs regardless of when the payment is made. Likewise, we need to make the journal entry for the accrued rent expense if it has already occurred but we have not made payment for it yet.
Rental services such as the rent of property or equipment usually require payment in advance, hence, we may not see the case of accrued rent expense often. However, sometimes, there may be a case of late payment or agreement that allows us to use the rental equipment or property for a period of time before making the total payment for the time of use.
Accrued rent expense journal entry
We can make the journal entry for the accrued rent expense by debiting the rent expense account and crediting the rent payable account.
| Account | Debit | Credit |
|---|---|---|
| Rent expense | 000 | |
| Rent payable | 000 |
When we make the rent payment for the liability above, we can make the journal entry by debiting the rent payable account and crediting the cash account.
| Account | Debit | Credit |
|---|---|---|
| Rent payable | 000 | |
| Cash | 000 |
This journal entry is made to eliminate the rent payable on the balance sheet that we have recorded in the prior period.
Accrued rent expense example
For example, on January 01, 2021, we rent a car to use in our business operation. The rental fee is $800 per month and due to special conditions, we are allowed to make the first payment of $2,400 (800 x 3) at the end of the third month of the rent period.
In this case, there won’t be any payment in January and February 2021. However, we still need to make the journal entry for the accrued rent expense in January and February 2021 as below:
On January 31, 2021
| Account | Debit | Credit |
|---|---|---|
| Rent expense | 800 | |
| Rent payable | 800 |
On February 28, 2021
| Account | Debit | Credit |
|---|---|---|
| Rent expense | 800 | |
| Rent payable | 800 |
On March 31, 2021
When we make the payment of $2,400 at end of the third month which is March 31, we can make the journal entry as below:
| Account | Debit | Credit |
|---|---|---|
| Rent payable | 1,600 | |
| Rent expense | 800 | |
| Cash | 2,400 |
In this journal entry, the debit of 1,600 rent payable is to eliminate the rent payable that we have recorded in January and February and the debit of 800 of rent expense is to recognize the rent expense that has incurred in March 2021.
