Payment made now for the months ahead - how to split it?

[Mike or Penny Novack]

James Kerr wrote:

> On 12/02/2012 07:45, llny wrote:
>
>>  I pay my rent once every
>> three months, but I'd like the payment to be split into three, such 
>> that my
>> housing account shows a consistent rent payment each month and thus my
>> monthly profit/loss doesn't spike every three months.
>>
>> How do I enter such a payment?
>>
Jim showed you how but didn't address the real question. Are you 
intending to keep your books on the "cash" or "accrual" basis? In order 
to answer that question you need to know the differences between them 
(what each does for you) and any regulations which might require you to 
use one or the other regardless of your preferences.

If books are kept on the "cash" basis they will have such "spikes". 
Evening things out is one of the reasons for bookkeeping on the 
"accrual" basis. But before jumping best if you studied all the pros and 
cons*, not just this one.

Michael

* Note in Jim's example --- you had to remember to enter two 
transactions with no external activity to remind you that you needed to 
do them. In "cash" accounting you will always (very few exceptions) have 
some external "trigger" for each transaction you enter. By and large 
"cash" accounting is simpler and less work and preferred for beginners. 
I would not recommend any beginner (at bookkeeping) attempt "accrual" 
unless required to do so.


>
> Create an asset account "Prepaid Rent"
>
> Assuming you pay 300 every three months:
>
> When you pay the rent:
>     Rent expense 100
>     Prepaid Rent 200
>     Bank              300
>
> In each of the following two months:
>     Rent expense 100
>     Prepaid Rent      100
>
> Jim
>
>
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There is no possibility of social justice on a dead planet except the equality of the grave.