Cancellation of rent expense straight-lined over the payment period
Straight-lining rent expense over the payment period applies the matching principle considering each payment individually for providing its period of reference during which recognize the matching expenses.
For any accounting period included within the period of a payment, the periodic rent expense is equal to the payment divided by the total number of accounting periods included within the payment period.
Payment being due in advance or in arrears is of no significance in this concern:
• 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 |