Deferred Revenue
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Some landlords collect rent from their tenants in advance. If rent received in January applies to the use of property in February, the revenue is earned in February, not January. In January, when the entity receives cash, the credit offsetting the debit to Cash is to a liability account (Deferred Rent). This account reports the entity's obligation to provide the tenant with the use of the property in February. The entries for rent of $600 received in January and applied to the use of property in February are as follows:
In January
|
Dr. Cash |
600 |
|
|
Cr. Deferred Rent |
600 |
In February
|
Dr. Deferred Rent |
600 |
|
|
Cr. Rent Revenue |
600 |