Answer to Question #207619 in Accounting for Noluthando

Question

On 01 January 2020, a portion of a company's building was let to a tenant. However, rental of R26 200 was received and recorded for the entire year and included rent for January 2021. The company has a 31 December 2020 year-end. The January 2021 rent includes a 10% increase. Find journal entry that should be processed at year end

Answer 1

Solution:

The initial journal entry for the rent received for the year 2020 including the one received in advance for January 2021 will be as follows:

 

January 1^st 2020:   Dr. Cash A/c                                              26,200

                                          Cr. Rent received in advance A/c                                             26,200

(To record total rent received in advance)

 

At the end of the year, record the actual rent received for the year by deducting the rent for January 2021:

First, determine monthly rent payments:

Monthly rent payments = $\frac{26,200}{13} = 2,015$

Rent payments for the year 2021 = 2,015 $\times$12 = 24,180

 

December 31^st 2020: Dr. Rent received in advance A/c          24,180

                                                 Cr. Rent income A/c                                                         24,180

(To record adjustment entry for the actual rent received for the year)