Accounting for rent received before due date

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  • Accounting for rent received before due date

    First, I'm assuming that if rent is payable in advance it is still earned on the due date and not at end of period it relates to.

    So my question is about accounting for rent received before the due date. E.g. rent payable monthly in advance but tenant pays 6 months up front.
    In such case my understanding is that rent becomes earned on a monthly basis, as it becomes due.

    How do you account for this?

    My current thinking from research:
    - debit 'bank' asset account to record payment received,
    - credit 'deferred income' liability account for same amount,
    - debit deferred income account as rent becomes due and credit income in P&L.

    Does this sound right?

    Regarding tax, if using cash method, should revenues be credited of the full 6 months worth of rent payment as soon as payment is received?

    I'm trying to further my understanding of accounting, so I have rather academic questions, I hope that's alright...

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