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Level 2

How to record prepaid rent without affecting the cash basis Profit & Loss Report? If I make a journal entry Dr. Prepaid Rent Cr. AP both my Cash & Accrual P&L is adjusted

 
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Level 15

How to record prepaid rent without affecting the cash basis Profit & Loss Report? If I make a journal entry Dr. Prepaid Rent Cr. AP both my Cash & Accrual P&L is adjusted

Journal entries should be the exception when using QB, they often do not work as you think they should, and  when you use inventory type items they never work for inventory. It is much better to use the forms on the home page the way QB is designed to be used.    Journal entries also bypass accrual/cash reporting, and will not show on many reports.

 

Create a liability account named pre-paid rent

create a service item for prepaid rent and link it to the liability account

 

use that item on a sales receipt or invoice when you receive the prepaid rent

when the month the prepaid rent comes around, use a sales receipt

line one - your rent item, qty one, amount

line two, prepaid rent item, qty negative one, same amount

save the zero dollar transaction

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Community Champion

How to record prepaid rent without affecting the cash basis Profit & Loss Report? If I make a journal entry Dr. Prepaid Rent Cr. AP both my Cash & Accrual P&L is adjusted

Prepaid rent is only an issue in Cash Basis but due to the nature of Cash Basis if the money is in hand for next month (or year, typically) and must be counted as income when received, not billed.

 

I have 8 +/- rental companies and we only worry about prepaid rent once a year. We do not "close" books on a monthly basis. We DO use journal entries, though, and our CPA, who is also QB certified supports this method.

 

We create one JE on 12/31 to debit prepayments and credit rent income. Then on 1/1 we enter a JE of the direct opposite, debit income, credit prepayment. Typically that prepayment will take care of a portion of 1/1 posted rent. But in our situation we use a third party CRM software managing all tenants and rent money and sync it to quickbooks. It automatically applies prepayments to Rent (not to other charges but it can) once the new rent invoice date arrives.

 

So far no issues, However, if you need to do this more than once per year (not on an annual end of year) you should follow the steps outlined by Rustler

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Level 1

How to record prepaid rent without affecting the cash basis Profit & Loss Report? If I make a journal entry Dr. Prepaid Rent Cr. AP both my Cash & Accrual P&L is adjusted

 

Rustler:  Can I see this in a video clip?

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