Rent

Code: 5220
👁 Views: 116

Account Information

Financial Statement Income Statement
Normal Balance Debit

Definition

Office or facility rent expense

Sub-accounts

5221

Office Rent

5222

Warehouse Rent

📐 IFRS vs US GAAP Accounting Treatment

IFRS IFRS 16 Leases
US GAAP ASC 842 Leases

❓ Frequently Asked Questions

Q: What is the difference between operating lease and finance lease?

A: An operating lease is a short to medium-term lease, and the asset and liability are not recorded on the balance sheet (expense is recognized directly). A finance lease is a long-term lease that effectively transfers ownership of the asset to the lessee by the end of the contract, and a right-of-use asset and liability are recorded on the balance sheet under IFRS 16.

Q: How is prepaid rent recorded?

A: When paying rent in advance for several months, the entry is: Dr. Prepaid Rent (asset), Cr. Bank Account. At the end of each month, a portion of the prepaid rent is transferred to expense with the entry: Dr. Rent Expense, Cr. Prepaid Rent.

Q: Is the right-of-use asset under lease contracts depreciated?

A: Yes, under IFRS 16, the Right-of-Use Asset arising from lease contracts (both operating and finance) is depreciated over the lease term. Depreciation is recorded with the entry: Dr. Depreciation Expense - Right-of-Use Asset, Cr. Accumulated Depreciation - Right-of-Use Asset.