JE-11 Jan 2026Manualposted
Pay the quarter's rent in advance.
| Account | Dimensions | Debit | Credit |
|---|---|---|---|
| 1310 Prepaid rent | 15,000 US Dollar | ||
| 1000 Cash | 15,000 US Dollar | ||
| Totals | 15,000 US Dollar | 15,000 US Dollar | |
Balanced.
Journal entry for prepaid rent
When rent is paid in advance, debit Prepaid rent and credit Cash. At each month-end, debit Rent expense and credit Prepaid rent for the month the space was used.
- Quarter's rent
- $15,000
- Monthly rent expense
- $5,000
- Entity
- Illustrative company
- Basis
- Accrual
- Currency
- USD
- Period
- Q1 2026
The worked example
A startup on a month-to-month sublease pays $15,000 on January 1, 2026 for the first quarter's rent. Each month uses $5,000 of it.
Transaction · January 1, 2026
Adjusting entry · January 31, 2026
JE-231 Jan 2026Adjustingposted
Recognize January's rent.
Journal entry JE-2, 2 lines Account Dimensions Debit Credit 6100 Rent expense 5,000 US Dollar 1310 Prepaid rent 5,000 US Dollar Totals 5,000 US Dollar 5,000 US Dollar Balanced.
Prepaid rent, by month
Computed by the same tested function the toolbelt runs. The last period absorbs any rounding, so the schedule sums to the cent.
| Month | Rent expense | Prepaid remaining |
|---|---|---|
| Jan 2026 | 5,000.00 | 10,000.00 |
| Feb 2026 | 5,000.00 | 5,000.00 |
| Mar 2026 | 5,000.00 | 0.00 |
What the entries do to the accounts
Every entry above posted to the ledger, starting from zero balances: the net debit or credit each account is left with. Debits equal credits, so the books still balance.
| Account | Debit | Credit |
|---|---|---|
| 1000 Cash | 15,000 US Dollar | |
| 1310 Prepaid rent | 10,000 US Dollar | |
| 6100 Rent expense | 5,000 US Dollar | |
| Totals | 15,000 US Dollar | 15,000 US Dollar |
Why it is booked this way
Paying a quarter's rent on the first day of the quarter buys three months of occupancy. Until each month passes, the unused months are an asset.
This treatment is for short-term arrangements. A lease longer than twelve months goes on the balance sheet under ASC 842 as a right-of-use asset and a lease liability instead, and prepaid rent stops being the right account.
Common mistakes
- Booking a quarter's rent as one month's expense because the invoice arrived in that month.
- Keeping a long-term office lease as prepaid rent when ASC 842 requires a right-of-use asset and a lease liability.
Questions
- Does prepaid rent still exist under ASC 842?
- Usually not under ASC 842. A lease of office space longer than twelve months puts a right-of-use asset and a lease liability on the balance sheet, and the rent payments reduce the liability. Prepaid rent as its own account belongs to short-term leases of twelve months or less and to month-to-month arrangements.
- Is prepaid rent an asset or a liability?
- A current asset: it is consumed within the year.
Terms on this page
Work with this entry
The tool that computes the schedule, the concept behind it, the entries that come next and the components that render them.
- Prepaid & deferred releaseA premium paid on the 17th does not release in twelve equal slices. Day-weighted, or even — your call. Put your own figures in and get the schedule behind this entry.Tool
- Prepaid expenses, explained for foundersCash paid before you use what it buys, like a year of software or insurance. It's an asset that runs down month by month.Doc
- Journal entry for prepaid insuranceWhen the premium is paid, debit Prepaid insurance and credit Cash. At each month-end, debit Insurance expense and credit Prepaid insurance for the month's share of the policy, until the prepaid balance reaches zero.Entry
- Journal entry for an operating lease under ASC 842At commencement, debit Right-of-use asset and credit Lease liability for the present value of the payments. Each payment debits Lease liability and credits Cash; each month-end debits Operating lease cost for the straight-line cost and credits Lease liability for the interest and the right-of-use asset for the rest.Entry
- Journal entry for a prepaid software subscriptionWhen an annual software subscription is paid up front, debit Prepaid software and credit Cash (or Accounts payable). Each month-end, debit Software expense and credit Prepaid software for the days of service used that month.Entry
- ScheduleTableOne shell, seven presets. Prepaids through debt.Component
- JournalEntryDebit and credit as two columns. No signed-column variant.Component
An illustrative company, not anyone’s real books. Every figure on this page is computed from the inputs in the example and posted by the same functions as the journal entry balancer. General information for US companies under US GAAP, not accounting or tax advice.