When the rent is paid by a business firm in respect of the premises occupied for the purpose of the office or for manufacturing unit or for godowns or for guest houses for official purpose then in will be booked under rent paid account. Some time plant and machinery or furniture is also taken on rent basis. In that case also rent paid account can be debited. Though,  separate accounts also can be opened for rent paid for different  purposes but normally one account is opened as rent paid account in maximum case.

Rent paid may be direct expenses or indirect expenses both. Rent paid for godowns or factory area, will be treated as direct expenses and rent paid for office purpose or guest house purpose, will be treated as indirect expenses. Rent paid for plant and machinery or any thing which is directly used by a manufacturing unit will be a direct expenses while rent for any thing which is used for official purpose will be indirect expenses.

Unpaid rent will be added to rent paid account and will be shown in liabilities side of balance sheet.

Accounting Treatment of Rent Paid Account

a) In case of payment in cash or by cheques:-

Type of voucher to be prepared:- Cash or Bank payment voucher

Entry to be made

Debit:-   Rent Paid Account

Credit:-   Cash Account

or

Bank Account

b) In case of unpaid rent:-

Type of voucher to be prepared:-  Journal voucher

Entry to be made

Debit:-           Rent Paid Account

Credit:-          Rent Payable Account

or

Expenses payable Account

or

Outstanding Expenses Account

or

Owner’s Personal Account

Treatment of Rent Paid Account in Final Accounts

In case of rent paid as direct expenses, will be shown in expenses side of trading account and rent paid as indirect expenses, will be shown in expenses side of profit and loss account.

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