Date

General journal

Debit

Credit

Sept 30

Prepaid Rent

$3,500

Cash

$3,500

Example 2:

Sept 1: Issued Check 1169 for $2,000 to pay the September rent.

Date

General Journal

Debit

Credit

Sept 1

Rent Expense

$2,000

Cash

$2,000

• What is the difference between Rent Expense and Prepaid Rent?

Think of the time period assumption in accounting. Accountants generally create monthly financial statements for owners to review. If an income statement was created for the month of September (Sept 1-30), you would not want October's rent expense to be in September's expenses - so in the first example, this is why it is journalized to a Prepaid Asset account. Then, in October an adjusting entry will be made to move it from Prepaid Asset account to Rent Expense Account.