Understanding Prepaid Rent Receipts

It is common for a landlord to receive rent payments before the month that the rent is due. Public companies are required to record these early rent payments in an unearned revenue liability account in the month the payment was received. You can use the JD Edwards EnterpriseOne Real Estate Management system to enter these types of rent payments as prepaid rent receipts.

Prepaid rent receipts are similar to unapplied receipts. The system classifies an unapplied receipt as a prepaid rent receipt under the following circumstances:

• The Allow Prepaid Rent processing option in the RE Receipts Entry program (P15103) is set to 1.

• The Prepaid Rent Bill Code field on the RE Receipts Entry form contains a valid bill code.

• The GL date of the receipt is less than the invoice date that the receipt is applied to.

  The system does not consider a receipt to be prepaid rent if the GL date of the receipt is in the same period or a later period as the invoice that the receipt is being applied to.

When working with prepaid rent receipts, you enter the receipt when the payment is received and then apply the rent payment by selecting or loading an invoice. The system automatically creates the additional accounting entries during the posting process. In the month that you receive the prepaid rent, the system debits the bank and credits the Unearned Revenue -Prepaid Rent liability account. On the date of the invoice, the system debits the Unearned Revenue -Prepaid Rent liability account and credits the Tenant Receivables (A/R) account. Therefore, when working with prepaid rent receipts, the system creates additional records in the Receipts Detail table (F03B14).

If the receipt amount is the same as the invoice amount, it is a simple invoice match. For example, if a billing invoice is created for March 1st for 1,000.00 and payment is received on February 20th for 1,000.00, the system creates the following entries when you run the post program:

G/L Date	Account Number	Account Description	Debit/Credit	Amount
February 20th	15020.1110.FIB	First Interstate Bank	Debit	1,000.00
February 20th	15555.4300	Unearned Revenue -Prepaid Rent	Credit	1,000.00
March 1st	15555.4300	Unearned Revenue -Prepaid Rent	Debit	1,000.00
March 1st	15555.1211	Tenant Receivables	Credit	1,000.00

If the receipt amount is greater than the invoice amount, it is an overpayment and the system applies the additional receipt amount to unapplied cash. For example, if a billing invoice is created in March for 1,000.00 and payment is received on February 20th for 1,200.00, the system creates the following entries when you run the post program:

G/L Date	Account Number	Account Description	Debit/Credit	Amount
February 20th	15020.1110.FIB	First Interstate Bank	Debit	1,200.00
February 20th	15555.4300	Unearned Revenue -Prepaid Rent	Credit	1,000.00
February 20th	15555.3000	Unapplied Cash	Credit	200.00
March 1st	15555.1211	Tenant Receivables	Credit	1,000.00
March 1st	15555.4300	Unearned Revenue -Prepaid Rent	Debit	1,000.00

Also, there may be a situation in which you do not specifically enter a receipt as prepaid rent, but the system processes the receipt as prepaid because the transaction has met the conditions for prepaid rent processing. If you enter and post a receipt as unapplied cash, and then later you spread the unapplied cash to a single future invoice or multiple future invoices, you have effectively created a prepaid rent receipt.

For example, you might enter and post an unapplied cash receipt from February 20th for 1,000.00 and then decide to associate that receipt with an invoice from March 1st for 1,000.00. In this case, the system prompts you to enter a prepaid rent bill code, since the receipt meets the conditions for prepaid rent processing. The system creates the following entries when you run the post program:

G/L Date	Account Number	Account Description	Debit/Credit	Amount
February 20th	15555.4300	Unearned Revenue - Prepaid Rent	Credit	1,000.00
February 20th	150.1212	Unapplied Cash	Debit	1,000.00
March 1st	15020.1211	Tenant Receivables	Credit	1,000.00
March 1st	15555.4300	Unearned Revenue -Prepaid Rent	Debit	1,000.00