Prepaid Rent Journal Entry Explained | Accounting 101

How do you record prepaid rent in a journal entry? And why is prepaid rent an asset instead of an expense? In this Accounting 101 example, we’re back with the traveling Goose Petting Zoo and walking through the transaction using my 6-step journal entry method. We’ll work through: What happened? Which accounts are affected? What type of accounts are they? Are those accounts increasing or decreasing? Which account is debited and which is credited? Does the journal entry make sense? This example is especially helpful if you’re taking Principles of Accounting, Financial Accounting, Intro to Accounting, or Accounting 101 and are learning how prepaid expenses work. Key concept: Paying for rent in advance does not automatically mean you record Rent Expense. If the business hasn’t used the rental period yet, the payment creates a prepaid asset. 📄 Grab my FREE 6-Step Journal Entry Framework here: https://accountingrescue.thinkific.co... I’m Lisa, a CPA and accounting professor, and I teach accounting students how to understand the why behind journal entries instead of just memorizing debits and credits. Need more help with Principles of Accounting? Accounting Rescue has step-by-step lessons, practice problems, workbooks, and additional help with the accounting cycle: https://accountingrescue.thinkific.com/ Goose on the Loose Journal Entry #2 #Accounting #Accounting101 #JournalEntries #FinancialAccounting #PrepaidRent