Pay $3000 toward lease agreement for office. The agreement is for 1year. The rent is 1,500 per month, last months rent was required at time of lease agreement. Lease period is effective July 1st 2014 through jun 30th 2015.
I think it's like this:
Rent expense 1,500.00
Prepaid rent 1,500.00
How do I add the cash?
Would the 3,00.00 be another entry on its own?
Like cash 3,000.00
And rent 3,000.00
To correctly record the payment of $3,000 toward the lease agreement for the office, you would need to make the following journal entry:
1. Debit: Rent Expense - $1,500
2. Debit: Prepaid Rent - $1,500
3. Debit: Cash - $3,000
4. Credit: Prepaid Rent - $1,500
5. Credit: Cash - $1,500
Explanation:
1. Debiting Rent Expense for $1,500 recognizes the monthly expense for the rent.
2. Debiting Prepaid Rent for $1,500 reduces your prepaid rent balance by one month.
3. Debiting Cash for $3,000 reflects the cash outflow for the lease payment.
4. Crediting Prepaid Rent for $1,500 adjusts the prepaid rent balance to account for the payment made.
5. Crediting Cash for $1,500 reduces the cash balance by the amount paid.
After making this journal entry, your Rent Expense account will show a total of $1,500, and the Prepaid Rent account will have a balance of $0 since you have used up one month of prepaid rent. Additionally, the Cash account will reflect a decrease of $3,000.