The rent received journal entry is used to record income earned from leasing out property or space. It reflects the inflow of funds and ensures the rent is recognized as revenue in the correct accounting period. This entry plays a key role in maintaining accurate financial records and supports effective income tracking, cash flow management, and tax compliance. Depending on how the rent is received cash or bank the corresponding asset account is debited, while the Rent Income Account is credited.
What is Rent?
Rent is the amount paid by a business or person to use land, a shop, an office, or equipment. This payment is made on a fixed schedule, mostly every month. Rent is important for people who do not own their place of work or living. Every month, they must pay the landlord or property owner for using the space. Rent is an expense in business accounting. When a business pays rent, it reduces the business’s profit. Businesses pay rent for many places like:
- Office space
- Warehouses
- Shops
- Factory land
How to Pass the Rent Received Journal Entry?
Passing the journal entry for rent income is essential for accounting students and small business owners. This ensures accurate financial records and reflects true business earnings. When rent is received—whether through cash, cheque, or bank transfer—it is recorded as income. The journal entry is:
- Debit – Cash/Bank Account
- Credit – Rent Income Account
This entry increases the cash or bank balance and recognizes the income earned during the period.
Journal Entry Format:
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
| DD/MM/YY | Cash/Bank A/c Dr. | XXXXX | ||
| To Rent Received A/c | XXXXX | |||
| (Being rent received) |
This entry is called the rent received double entry because it follows the double-entry system: one account is debited, and one is credited. In this case, the Cash or Bank account is debited because the business receives money, and the Rent Received account is credited because income increases.
Why Rent Received Entry is Important?
Recording the rent income journal entry is crucial because it ensures that income is correctly reflected in the financial statements. It helps track rental earnings, manage receivables, and supports accurate tax reporting. Properly recorded entries also improve transparency and allow businesses to assess their recurring income streams effectively. Always credit the rent received account because income increases and income accounts are always credited. The rent received accounting entry is important because:
- It shows the income from rent properly.
- It helps maintain accurate financial records.
- It helps you prepare final accounts like the Profit and Loss Account.
- It helps with tax calculations.
Different Scenarios in Rent Income Journal Entry
Rent income can be received under various circumstances—such as in cash, via bank transfer, in advance, or with GST. Each scenario requires a slightly different journal entry to reflect the accurate nature of the transaction. Understanding these variations helps ensure that the rent income is recorded correctly in every situation, aligning with accounting standards and providing a true picture of the business’s financial position. There are different ways to record this based on how the rent is received:
- If rent is received in cash, you debit Cash A/c.
- If it comes to your bank, debit Bank A/c.
- If rent is due but not yet received, you debit Rent Receivable A/c under the accrual system.
So, rent received entry under accrual changes based on whether the rent is actually received or still due.
Rent Received Journal Entry in Cash and Bank Transactions
Recording rent received is an essential part of accounting for any business or property owner. Whether the rent is received in cash or through a bank transaction, it must be documented correctly to reflect the income earned and the mode of receipt. The journal entries vary slightly based on how the rent is received, ensuring accurate tracking of cash flow and revenue. You may receive rent either in cash or directly into your bank account. In both cases, the journal entry stays the same, but the debit account changes. This section explains how to record these situations.
Journal Entry for Rent Received in Cash
When rent is received in cash, the transaction increases both the business’s income and physical cash on hand. This entry must be recorded promptly to reflect the correct cash balance and rental earnings. It is important to ensure that the rent is acknowledged as income and that the source of cash is properly documented in the books. If you receive the rent amount in hand, it is a cash transaction. Here’s how you record it:
Journal Entry:
| Cash A/c Dr.To Rent Received A/c |
This is the most basic rent income journal entry. It is used when a tenant pays in cash, and you receive it immediately.
You must keep the rent receipt as proof of the transaction. It helps you record the entry on the correct date. Also, the cash amount received should be shown in the cash book.
Rent Received in Bank Account
When the rent is received via bank transfer, cheque, or direct deposit, the transaction affects the bank balance rather than physical cash. In this case, the journal entry recognizes rent income and simultaneously increases the balance of the bank account. This method is often preferred for transparency and easier reconciliation with bank statements. Sometimes, rent comes directly to the bank through NEFT, RTGS, or cheque. In such cases, we debit the bank account instead of cash.
Journal Entry:
| Bank A/c Dr.To Rent Received A/c |
In accounting software or books, you must show this entry under the bank column of your journal or ledger. If you use software like Tally, this becomes the rent received entry in Tally under the Receipt Voucher.
Comparison of Cash vs. Bank Rent Entry
While both cash and bank rent entries serve to record income, the difference lies in the mode of receipt and the accounts involved. Cash entries impact the cash account, while bank entries affect the bank account, but both credit the rent income account. Understanding this distinction helps ensure accurate categorization and proper financial reporting. Cash Rent means Rent is received or paid using physical cash; journal entry uses the Cash Account. Bank Rent means Rent is received or paid through bank transfer or cheque; journal entry uses the Bank Account. Below is a detailed explanation through entries
| Mode of Receipt | Debit Account | Credit Account | Document Needed |
| Cash | Cash A/c | Rent Received A/c | Rent receipt, cash memo |
| Bank | Bank A/c | Rent Received A/c | Bank statement, rent slip |
Rent Received Entry Format in Books
In physical books, you record rent under the journal book and then post it to the rent received ledger. In Tally, you use the Receipt Voucher and select Indirect Income under the Rent Received ledger. You record it in the journal, then post it to the ledger, and finally include it in your income statement. If you use the cash system of accounting, record only when money is received. But if you follow the accrual system, you also record rent receivable if rent is due but not received yet.
Accounting Treatment of Rent Received
The accounting treatment of rent received involves recognizing it as income in the books when it is earned, regardless of whether the payment is received in cash or through the bank. Rent received is credited to the Rent Income Account, which appears under indirect incomes in the Profit and Loss Account. Depending on the mode of receipt, either the Cash Account or the Bank Account is debited. This treatment ensures that all income is accurately recorded, supporting clear financial reporting and compliance with accounting standards.
Rent as Indirect Income
In the profit and loss account, rent received is shown under Indirect Income. It increases the net profit of the business. If you run a property rental business, you show rent as Operating Income. However, in most other businesses, it is shown under Other Income. The rent income journal entry should match the amount shown in the profit & loss statement. If it doesn’t, your books will not balance.
Rent Received with GST
Rent Received with GST refers to rental income on which Goods and Services Tax is applicable, typically when the rental amount crosses the prescribed threshold or involves commercial property. In such cases, the rent received includes GST, which must be collected from the tenant and later paid to the government. The accounting entry must reflect both the rental income and the GST liability, ensuring compliance with tax regulations and accurate financial reporting. Proper treatment of rent with GST is essential for businesses registered under the GST regime. If the rent is from a commercial property, GST is applicable. Residential rent is usually exempt.
Journal Entry Rent Received with GST
| Bank A/c Dr.To Rent Received A/cTo Output GST A/c |
Here, GST is credited as a liability. You must deposit this GST to the government.
In Tally, create separate ledgers for:
- Rent Received under Indirect Income
- Output GST under Duties & Taxes
When rent includes GST, separate the GST part in the entry.
Rent Received Ledger
The Rent Received Ledger is an individual account in the accounting system that records all transactions related to rental income. It helps in tracking how much rent has been received over a specific period and from which sources. This ledger is credited each time rent income is earned and is used to prepare financial statements, especially the Profit and Loss Account, where rent appears as indirect income. Maintaining a separate rent received ledger ensures clarity, accuracy, and better financial control. Maintain a rent-received ledger in your books or software. It records all rent entries with date, amount, mode, and GST.
Format:
| Date | Particulars | Voucher Type | Debit | Credit | Balance |
| 01-04-2025 | Rent from Office | Receipt | 20,000 | 20,000 Cr |
This ledger helps you track rent income monthly or yearly. You can use it for audit and tax filing.
Rent Received Example
Suppose Mr. Ravi owns a shop and rents it out for ₹15,000 per month. On 1st April, he received rent from the bank.
Entry:
Bank A/c Dr. ₹15,000
To Rent Received A/c ₹15,000
If the rent includes GST @18%, the entry becomes:
Bank A/c Dr. ₹17,700
To Rent Received A/c ₹15,000
To Output GST A/c ₹2,700
This example explains how to record rent with and without GST.
Relevance to ACCA Syllabus
Rent received is part of revenue and needs to be recognized properly in financial accounts under the accrual concept. ACCA students must understand how to record such incomes according to International Financial Reporting Standards (IFRS), especially IAS 1 (Presentation of Financial Statements) and IFRS 15 (Revenue from Contracts with Customers). Knowing the correct journal entry helps build a foundation for advanced financial reporting, tax, and performance management.
Rent Received Journal Entry ACCA Questions
Q1. What is the correct journal entry when rent is received in cash?
A) Rent Income A/c Dr. To Cash A/c
B) Cash A/c Dr. To Rent Income A/c
C) Bank A/c Dr. To Rent Expense A/c
D) Cash A/c Dr. To Rent Expense A/c
Ans: B) Cash A/c Dr. To Rent Income A/c
Q2. Under accrual accounting, how do you record rent income earned but not yet
received?
A) Rent Income A/c Dr. To Accrued Rent A/c
B) Accrued Rent A/c Dr. To Rent Income A/c
C) Rent Income A/c Dr. To Bank A/c
D) Cash A/c Dr. To Rent Income A/c
Ans: B) Accrued Rent A/c Dr. To Rent Income A/c
Q3. Which IFRS standard mainly governs rent income recognition?
A) IFRS 9
B) IFRS 15
C) IFRS 16
D) IAS 37
Ans: B) IFRS 15
Q4. Where do you show rent received in advance in the balance sheet?
A) As revenue under the income statement
B) As accrued income under assets
C) As prepaid expense under assets
D) As unearned income under current liabilities
Ans: D) As unearned income under current liabilities
Q5. When rent is received but relates to the next accounting period, what entry is correct?
A) Rent Income A/c Dr. To Prepaid Rent A/c
B) Rent Income A/c Dr. To Unearned Rent A/c
C) Cash A/c Dr. To Rent Income A/c
D) Bank A/c Dr. To Accrued Rent A/c
Ans: B) Rent Income A/c Dr. To Unearned Rent A/c
Relevance to US CMA Syllabus
US CMA focuses on management accounting and internal financial reporting. Rent received is considered other income, and understanding how to record it properly helps in the accurate preparation of income statements and budgeting. It also helps in performance evaluation, as incorrect income recording can affect operating margins and forecasts.
Rent Received Journal Entry US CMA Questions
Q1. Which of the following best reflects rent received on an accrual basis?
A) Recognize when payment is received
B) Recognize when rent is earned
C) Recognize after tenant vacates property
D) Recognize only at year-end
Ans: B) Recognize when rent is earned
Q2. In the context of rent received, what is classified as “non-operating income”?
A) Rent received from letting out a main office building
B) Rent received from core business activity
C) Rent received from leasing out extra space
D) Rent charged to employees
Ans: C) Rent received from leasing out extra space
Q3. If rent is received for the next quarter, how should it be treated?
A) Rent income
B) Deferred income
C) Accrued income
D) Prepaid income
Ans: B) Deferred income
Q4. Where does rent income appear in a contribution margin income statement?
A) Above contribution margin
B) Below contribution margin
C) Along with variable costs
D) Deducted from fixed costs
Ans: B) Below contribution margin
Q5. In management reporting, why is accurate rent received recording important?
A) It affects goodwill valuation
B) It affects cash budgeting and forecasting
C) It affects share value
D) It affects the depreciation schedule
Ans: B) It affects cash budgeting and forecasting
Relevance to US CPA Syllabus
The US CPA syllabus includes the recording of transactions in line with US GAAP. Rent received is a revenue transaction and must be recorded using the accrual method, which is key in FAR (Financial Accounting and Reporting) and AUD (Audit). Rent received also affects deferred revenues and impacts the revenue recognition principle.
Rent Received Journal Entry US CPA Questions
Q1. Under US GAAP, how do you record rent received in advance?
A) As revenue immediately
B) As other income
C) As deferred revenue
D) As an asset
Ans: C) As deferred revenue
Q2. What is the effect of rent received on the cash flow statement?
A) Operating cash inflow
B) Investing cash inflow
C) Financing cash inflow
D) No impact
Ans: A) Operating cash inflow
Q3. Which principle supports the delay of rent income recognition until earned?
A) Cost principle
B) Matching principle
C) Revenue recognition principle
D) Going concern principle
Ans: C) Revenue recognition principle
Q4. What is the journal entry when rent is earned but not yet received?
A) Cash A/c Dr. To Rent Income A/c
B) Accrued Rent Receivable A/c Dr. To Rent Income A/c
C) Rent Income A/c Dr. To Cash A/c
D) Rent Expense A/c Dr. To Accrued Income A/c
Ans: B) Accrued Rent Receivable A/c Dr. To Rent Income A/c
Q5. Which US GAAP standard deals with revenue recognition from rent?
A) ASC 605
B) ASC 840
C) ASC 606
D) ASC 450
Ans: C) ASC 606
Relevance to CFA Syllabus
The CFA curriculum includes financial reporting and analysis, where accurate recognition of income, such as rent received, is important. Rent income impacts the income statement and balance sheet and must be properly categorized under IFRS or US GAAP. Understanding this topic is essential for valuation, forecasting, and equity analysis.
Rent Received Journal Entry CFA Questions
Q1. In equity valuation, how should rent income from investment property be treated?
A) Operating revenue
B) Other comprehensive income
C) Non-operating income
D) Expense Offset
Ans: C) Non-operating income
Q2. Under IFRS, how should rent received be recognized?
A) When earned
B) When invoiced
C) When collected
D) When budgeted
Ans: A) When earned
Q3. If rent is received annually in advance, how is it shown in financial statements?
A) Revenue
B) Current liability
C) Expense
D) Equity
Ans: B) Current liability
Q4. Rent income recognition affects which key ratio?
A) Return on Capital Employed
B) Asset Turnover
C) Current Ratio
D) Debt-to-Equity Ratio
Ans: A) Return on Capital Employed
Q5. What happens if the rent received is overstated in financial statements?
A) Assets are understated
B) Revenue is overstated
C) Liabilities are overstated
D) Equity is understated
Ans: B) Revenue is overstated
