India Question abt post dated cheques

[sree5krishnan]

the owner of a company has issued 3 post dated cheques 14/1/2011, 14/4/2011 and 14/7/2011 respectively for the rent from jan 14 to sept 14 from his personal account. Each cheque is for 76294.(for 3 months) How should this be accounted., The entries for the three cheques pls?
Thanks

 

[iNinjaNotes]

Any rent that is not "used" by the payer, meaning time that has not gone by will not be incurred as revenue.

You will account for the cheques using "unearned revenue" and "cash" and will adjust unearned revenue by using the entries "unearned revenue and revenue" when you EARN the rent. So when time passes each month, you earn a month of rent.

For example

Cash XXX
Unearned Revenue XXX

(1 month passes..)
Unearned Revenue XXX
Rent Revenue XXX

(another month passes..)
Unearned Revenue XXX
Rent Revenue XXX

And so on.

GL.

 

[iNinjaNotes]

Gahh, formatting didn't seem to work there. The first entry is of course a debit, while the second entry is a credit.

 

[bklynboy]

I believe the owner is issuing checks and not generating revenue. In any event there is no such thing as a PDC as the bank will cash it upon demand and is legally permitted to do so. The only exception is if you call your bank ahead of time and tell them not to cash until a certain date. I would stop this practice and simply issue checks as they are ready for payment. See below link:

Post-dated check - Wikipedia, the free encyclopedia

With that said, you should record all PDC's as a credit to cash (since it can be cashed immediately) and debit rent expense for the period incurred with a debit to prepaid rent for any amounts covering future rental periods. You would reduce teh prepaid rent asset each month you incurr the rent and debit rent expense.

As long as the checks remain outstanding then you will have a bank reconciliation item to your cash books.