Lessee Lessor

LEASE BONUS PAIDBY the LESSEE

No entry (If) the lessor acquired an equipment
Equipment (Debit) Cash (Credit)

Prepaid Rent (Debit) Cash (Credit) Cash (Debit) Unearned Revenue (Credit)
To record the lease bonus paid by the To record the lease bonus received by the
lessee lesor
Rent Expense (Debit) Cash (credit) Cash (Debit) Rent Revenue (Credit)
To record the monthly rental payments at To record the monthly revenue at the
the beginning of the month beginning of the month
No entry Insurance Expense, Maintenance Exxpense
(Debit) Cash (Credit)
(If) the company acquired insurance and
provides maintenance for the lessee.
No Entry Year-end adjustment (1) Depreciation
Expense (Debit) Accum. Dep. (Credit)
Rent Expense (Debit) Prepaid Rent (Credit) Unearned Rent Income (Debit) Rent
To record the lease bonus incurred for the Revenue (Credit) To record the realized
year rent revenue
Each Year end and at the end of the lease term
1st Yr. Rent Expense (Debit) Cash (Credit) 1st Yr. Cash (Debit) Rent Expense (Credit)
To record the monthly payments plus the To record the monthly payments plus the
lease bonus lease bonus received
+ Prepaid Rent (Debit) Rent Expense + Rent Revenue (Debit) Unearned Rent
(Credit) To record the difference from the (Credit) To record the difference from the
pro-rated amount and approximated pro-rated amount and approximated
amount amount
2nd Yr. Rent Expense (Debit) Cash (Credit) 2nd Yr. Cash (Debit) Rent Expense (Credit)
To record the monthly payments plus the To record the monthly payments plus the
lease bonus lease bonus received
+ Prepaid Rent (Debit) Rent Expense + Rent Revenue (Debit) Unearned Rent
(Credit) To record the difference from the (Credit) To record the difference from the
pro-rated amount and approximated pro-rated amount and approximated
amount amount
rd rd
3 Yr. Rent Expense (Debit) Cash (Credit) 3 Yr. Rent Expense (Debit) Cash (Credit)
To record the monthly payments plus the To record the monthly payments plus the
lease bonus lease bonus
+ Prepaid Rent (Debit) Rent Expense + Prepaid Rent (Debit) Rent Expense
(Credit) To record the difference from the (Credit) To record the difference from the
pro-rated amount and approximated pro-rated amount and approximated
amount amount
***Years are dependent on the agreement between the two parties. In this case, both
parties agreed for 2 years. Also the # of years do not necessarily represent the number of
years of both parties agreed; It is important that the duration of the contract has been
fulfilled.