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how to enter last month's rent when tenant pays first and last at start of lease

When we accept a tenant we collect deposit, first month and last month rents.  How do we enter last month's rent?

Comments

  • NotACPA
    NotACPA SuperUser, Windows Beta Beta
    edited October 2018
    That pre-paid Last month's rent should be recorded into a Liability account, not into your normal income category.  Then, when it's time to actually record the last month's rent, you use the money in that Liability account.
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  • smayer97
    smayer97 SuperUser, Mac Beta, Canada Beta ✭✭✭✭✭
    edited January 2017

    That pre-paid Last month's rent should be recorded into a Liability account, not into your normal income category.  Then, when it's time to actually record the last month's rent, you use the money in that Liability account.

    Don't know how it is in the US but in Canada, though the last month's rent deposit is still a liability you want to track, it is still considered taxable income at the time it is collected, and interest on the deposit is typically payable to the tenant at the end of each year (unless you add it to the last month's rent to compensate for rental increases) (rules vary between provinces). 

    So, you may need to record it as both income and a liability. One way is to record a transfer between the deposit account and the liability account (which will need to be offset with a dummy split line in the deposit transaction). It may look something like this:

    Rental Income : $xxx  (first month)
    Rental Income: $xxx (last month)
    Transfer to Liab acct: $xxx (tenant zzz)
    [deposit account]: -$xxx (offset transfer)   (notice the '-' minus)

    Then when you apply the deposit to the last month when the tenant moves out, simply enter a transaction to reduce the liability account. This could simply be a blank category or a 'transfer' into the same liability, i.e. not categorizing the transaction. 

    Of course if you are using the H&B or RPM versions of Quicken, I do not know if they have special features to handle this better.

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