Cancellation of rent expense straight-lined over the payment period
This method spreads each rent payment evenly across its own payment period. It applies the matching principle by recognizing expense over the period covered by that specific payment. The system treats each payment separately.
For any accounting period that falls within a payment period, the system calculates rent expense as follows:
• Take the individual payment amount
• Divide it by the number of accounting periods covered by that payment
This produces a proportional rent expense for each period within the payment range. The payment start, whether due in advance or in arrears, does not affect this calculation.
• If the payment is due in advance, then the payment is accrued and that accrual decreases to 0.00 at the end of each accounting period during which the straight-lined expense is recognized.
• If the payment is due in arrears, then each accounting period the straight-lined expense is recognized and accrued then when the payment is accrued it balances to 0.00.
Example 1: lease with quarterly payment
Start date: | 01 Apr 2023 |
End date: | 30 Mar 2028 |
Duration: | 5 years (20 quarters, 60 months) |
Payments
Start date | End date | Payment per | Total duration | Total amount |
|---|---|---|---|---|
01 Apr 2023 | 30 Mar 2028 | 30,000.00 per quarter | 20 quarters | 600,000.00 |
Total | 600,000.00 |
Each quarter cover 3 accounting periods
Straight-lining for payment of 01 Apr 2023:
Start date | End date | Payment | Expense |
|---|---|---|---|
01 Apr 2023 | 30 Apr 2023 | 30,000.00 | 10.000.00 |
01 May 2023 | 31 May 2023 | 10.000.00 | |
01 Jun 2023 | 30 Jun 2023 | 10.000.00 | |
Total | 30,000.00 | 30,000.00 |
Straight-lining for payment of 01 Jul 2023:
Start date | End date | Payment | Expense |
|---|---|---|---|
01 Jul 2023 | 30 Jul 2023 | 30,000.00 | 10.000.00 |
01 Aug 2023 | 31 Aug 2023 | 10.000.00 | |
01 Sep 2023 | 30 Sep 2023 | 10.000.00 | |
Total | 30,000.00 | 30,000.00 |
Example 2: lease with quarterly payment and 3 months free rent
Start date: | 01 Apr 2023 |
End date: | 30 Mar 2028 |
Duration: | 5 years (20 quarters, 60 months) |
Payments
Start date | End date | Payment per | Total duration | Total amount |
|---|---|---|---|---|
01 Apr 2023 | 30 Jun 2023 | 0.00 per quarter | 1 quarter | 0.00 |
01 Jul 2023 | 30 Mar 2028 | 30,000.00 per quarter | 19 quarters | 570,000.00 |
Total | 570,000.00 |
Each quarter cover 3 accounting periods
Straight-lining for payment of 01 Apr 2023:
Start date | End date | Payment | Expense |
|---|---|---|---|
01 Apr 2023 | 30 Apr 2023 | 0.00 | 0.00 |
01 May 2023 | 31 May 2023 | 0.00 | |
01 Jun 2023 | 30 Jun 2023 | 0.00 | |
Total | 0.00 | 0.00 |
Straight-lining for payment of 01 Jul 2023:
Start date | End date | Payment | Expense |
|---|---|---|---|
01 Jul 2023 | 30 Jul 2023 | 30,000.00 | 10.000.00 |
01 Aug 2023 | 31 Aug 2023 | 10.000.00 | |
01 Sep 2023 | 30 Sep 2023 | 10.000.00 | |
Total | 30,000.00 | 30,000.00 |
Example 3: lease with quarterly payment and 5 months free rent
Start date: | 01 Apr 2023 |
End date: | 30 Mar 2028 |
Duration: | 5 years (20 quarters, 60 months) |
Payments
Start date | End date | Payment per | Total duration | Total amount |
|---|---|---|---|---|
01 Apr 2023 | 31 Aug 2023 | 0.00 per quarter | 1 quarter + 2 months | 0.00 |
01 Sep 2023 | 30 Mar 2028 | 30,000.00 per quarter | 1 month + 19 quarters | 550,000.00 |
Total | 550,000.00 |
Each quarter cover 3 accounting periods
Straight-lining for payment of 01 Apr 2023:
Start date | End date | Payment | Expense |
|---|---|---|---|
01 Apr 2023 | 30 Apr 2023 | 0.00 | 0.00 |
01 May 2023 | 31 May 2023 | 0.00 | |
01 Jun 2023 | 30 Jun 2023 | 0.00 | |
Total | 0.00 | 0.00 |
Straight-lining for payment of 01 Jul 2023:
Start date | End date | Payment | Expense |
|---|---|---|---|
01 Jul 2023 | 30 Jul 2023 | 10,000.00 | 0.00 |
01 Aug 2023 | 31 Aug 2023 | 0.00 | |
01 Sep 2023 | 30 Sep 2023 | 10.000.00 | |
Total | 10.000.00 | 10.000.00 |
Straight-lining for payment of 01 Oct 2023:
Start date | End date | Payment | Expense |
|---|---|---|---|
01 Oct 2023 | 30 Oct 2023 | 30,000.00 | 10.000.00 |
01 Nov 2023 | 31 Nov 2023 | 10.000.00 | |
01 Dec 2023 | 30 Dec 2023 | 10.000.00 | |
Total | 30.000.00 | 30.000.00 |