Rent Payable Journal Entry is Rent Expense Account Debit and To Rent Payable Account Credit, and when Rent payable is to be paid, Rent Payable Account Debit and To Bank/Cash Account Credit. Rent payable refers to the rent expense that a company has incurred but has not yet paid. Below is an example scenario and the necessary journal entries for recording rent payable.
Example Scenario
Let’s assume Company A has an office rent of ₹15,000 per month, which is due on the last day of each month but will be paid in the following month. The entry for the rent payable at the end of July 2024 will be recorded.
Journal Entries
1. Recording Rent Expense and Rent Payable
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 31-07-2024 | Rent Expense | 15,000 | Recording rent expense for July | |
| 31-07-2024 | To Rent Payable | 15,000 | Rent due but not yet paid |
Explanation:
- Rent Expense Account Debit: Records the rent expense incurred for the month of July and which is a indirect expense.
- To Rent Payable Account Credit: Reflects the liability to pay the rent in the future and which is a current liability.
2. Paying the Rent in the Following Month
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 10-08-2024 | Rent Payable | 15,000 | Payment of rent for July | |
| 10-08-2024 | To Bank/Cash | 15,000 | Payment made from bank account |
Explanation:
- Rent Payable Account Debit: Reduces the liability as the rent is paid.
- To Bank/Cash Account Credit: Decreases the cash or bank account reflecting the payment made for the rent.
Conclusion
Recording rent payable involves first recognizing the expense and the associated liability when the rent is due, and then documenting the payment when it is made. Proper documentation of these entries ensures accurate financial reporting and effective management of the company’s liabilities.