how will I journalize this transaction?
Rented a backhoe to Mission Landscaping at a price of $250 per day, to be paid when the backhoe is returned. Mission Landscaping expects to keep the backhoe for about two or three weeks
Rented a backhoe to Mission Landscaping at a price of $270 per day, to be paid when the backhoe is returned. Mission Landscaping expects to keep the backhoe for about two or three weeks.
To journalize this transaction, you need to record it in the accounting books using appropriate journal entries. Here's how you can do it step by step:
1. Determine the accounts involved: In this transaction, two accounts are involved – "Accounts Receivable" (for recording rental revenue) and "Rent Income" (for recording rental income).
2. Record the debit entry: Since you have rented out the backhoe, you should record the rental revenue as a debit entry in the "Accounts Receivable" account. The amount will be based on the number of days the backhoe is rented multiplied by the daily rate. In this case, let's assume the backhoe is rented for 21 days (2-3 weeks). Hence, the debit entry will be:
Accounts Receivable - $250/day * 21 days = $5,250.
3. Record the credit entry: Next, you need to record the credit entry in the "Rent Income" account. This represents the income earned from renting out the backhoe. The amount will be the same as the debit entry in step 2, i.e., $5,250.
Rent Income - $5,250.
4. Complete the journal entry: Combine the debit and credit entries to form a journal entry. The journal entry for this transaction will be:
Accounts Receivable $5,250
Rent Income $5,250
Once you have completed the journal entry, remember to post the amounts to the respective ledger accounts in your accounting system.
Note: It is important to consult with a professional accountant or refer to your specific accounting guidelines to ensure accuracy and compliance with accounting standards.