Rent Between Companies

[maggie122097]

I work for a small manufacturing company. The company is split 25/75% between the two partners and there is an additional building at another location that is under the 25% owners name. I am to make a journal entry where the 75% company makes a $1500 a month Rent payment to the 25% company property. How would I do this? The account 1710 is a Fixed asset since it is a building and the Rent is account 4920 for our Shop. I do a General journal where account 1710 1500.00 CR and 4920 1500.00 DR. Is this correct? It just does not look right to me. The reason is the 1710 is a fixed asset and the account balance is going down. While the Shop Rent account 4920 is going up. I think I am over thinking this but I just want to make sure I do this correctly. There is no actual money exchanging hands. Please advise.......

 

[kirby]

The debit side of your entry makes sense but not the credit side. The building should not be "disappearing" a bit with each rental payment. Since no money is being exchanged the only thing to do is to credit "due to 25% company", which is a liability account.

 

[maggie122097]

So Kirby I should do:

1710 25% Account DR 1500 (Increasing the account by 1500 each month)
4920 Shop Lease CR 1500 (Decreasing the account by 1500 each month)

Account 1710 is a other asset account.
Account 4920 is Cost of Goods sold account