Date

Sept 30

General journal

Debit

Prepaid Rent

$3,500

Cash

Credit

$3,500

Example 2:

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

Date

Sept 1

General Journal

Rent Expense

Cash

Debit

$2,000

Credit

$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.