How to account for rent cheque?

Buddha Buck blaisepascal at gmail.com
Tue Mar 3 19:29:03 EST 2015


I would say not quite.

You need to record the payment as coming out of your checking account when
you deliver the check, not when it is cashed. If you write a check and
don't record it as being taken of your account then, you may look at your
records and decide you have the money to write another check when that
money is already committed.

Think of it this way: When you give the rent check to the land lord, you've
spent the money.  Your land lord thinks the money is his, you think the
rent's been paid. The fact that the bank hasn't caught up iwth reality
isn't a concern for your records.

The importance of cash v. accrual comes when there can legitimately be a
gap between when an expense or income "happens", and when money actually
changes hands. It is not uncommon in commercial transactions to have terms
like "Net 30", meaning that payment is considered to be on time up to 30
days after delivery of the goods or services. So when a business sells
something under those terms, the income "happens" when delivery is made,
and is usually taxable as happening then, but the money won't catch up for
a month.

But that doesn't apply to your situation.

On Tue, Mar 3, 2015 at 6:34 PM geo909 <geo909.fora at gmail.com> wrote:

> Thank you so much Edward, Dean, foxylady, and the two Michaels.. Your
> responses were an enormous help.
> Sorry for the late reply; there were a lot of things to digest from your
> answers and I did some reading too. But I think I understand well how
> accruel accounting works now, at least on a basic level.
>
> So, given that I go with the accruel method, can you please confirm that I
> get the following example right?
>
> Let's say that, as before, every first of the month I leave a cheque of
> 1000
> to my landlord. But now, I also have a roommate with whom I split the rent
> in half. So, I do the following:
>
> On the first of each month:
> . Expenses:Rent - debit of 1000
> . Liability:Rent - credit of 500
> . Asset:roommate owes me - debit of 500
>
> When the cheque is cashed:
> . Assets:Chequing account - credit of 500
> . Liability: Rent - debit of 500
>
> When my roommate pays me for half the rent that I payed on his behalf:
> . Asset:roommate owes me - credit of 500
> . Asset:Chequing account - debit of 500
>
> Does this look correct?
>
> Thanks
>
>
>
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