One common mistake with accounting for prepaid rent is to book it on the Balance Sheet instead of on the P&L when it takes place. In fact, some accounting software might have misguided you to do so.
Cash-basis accounting is the preferred method among real estate investors and CPAs. Therefore, prepaid rent should always be recognized as income on the date when it’s received.
In addition to multiple months’ of prepaid rent, one often overlooked example is when you receive a particular month’s rent on the 30th of the prior month. It’s important to include it in the prior month’s income.
Azibo uses cash-basis accounting and automatically reports transactions on the appropriate date, so you no longer need to worry about these mistakes.
Disclaimer: This content has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting or tax advice.