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Buy nowGood Day,
We are landlords of residential rentals. Our rent agreements are usually requires the tenant to pay their rent quarterly in advance.
So for example in Jan our rent invoice usually be (rent for the period 1 Jan 22 to 31 Mar 22)
The question is, what's the best way to invoice my tenants from QBO and at the same time have the it reported correctly. (Jan rent should be recorded as income whereas Feb & Mar rent should be unearned income in current liabilities.)
You will have to use a liability account named unearned revenue, create it in the chart of accounts
then a service item which posts to that account for the rent called prepaid rent
Receive the rent check using that service item on a sales receipt
then monthly do a sales receipt
line one should be your rent service item which posts to the rental income account
line two, the prepaid service item, a qty of negative one, and the monthly rental amount
Prepaid rent income is not deferred, it should be reported as income when received. The IRS requires prepaid rent to be included in income when received regardless of the period it covers or the accounting method you use.
Per the IRS:
Advance rent is any amount you receive before the period that it covers. Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. For example, you sign a 10-year lease to rent your property. In the first year, you receive $5,000 for the first year's rent and $5,000 as rent for the last year of the lease. You must include $10,000 in your income in the first year.
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