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A
Annamaria1923
March 1, 2025
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Renting contract collectable yearly

  • March 1, 2025
  • 2 replies
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Hi,

We have a 10-year rental contract for $6,000.00, payable yearly (we invoice the customer $600.00 every year). How can I register the whole contract amount and then the yearly collected rentals?

I really appreciate any help you can provide. 

Best answer by Rainflurry

@Annamaria1923 

 

Your first two entries cancel each other out, and the last two are the same as creating a monthly invoice and then receiving payment on that invoice.

 

To reiterate, it's improper lease accounting to recognize the full $6,000 contract amount on your balance sheet if this is an operating lease (presumably it is).  Just create the $600 yearly invoice and receive payment on it.

 

From PWC (link here):

If a lease is classified as operating, the lessor should keep the asset underlying the lease on its balance sheet and continue to depreciate the asset based on its estimated useful life. Rental revenue from lease payments should be recognized on a straight-line basis (or another systematic basis if that basis is more representative of the pattern in which income is earned from the underlying asset over the term of the respective lease).

 

       

2 replies

A
ArielI
March 1, 2025

Hello, Anna.

 

We can run a progress invoice and create a yearly receive payment transaction which will be deducted from your 10-year rental contract. Let me lay down the steps in detail.

 

First, ensure that the Progress Invoicing is enabled in your Account and settings.

 

 

Once done, you can start the process of running the progress invoice, here's how:

 

  1. Navigate to the +New tab and select Estimate under the Customer column.
  2. Add Product and services (Yearly rental contract).
  3. Enter the $6000 for an estimate.
  4. Click Save.
  5. Then click the Create invoice on the upper right side.
  6. Choose the second option on How much do you want to invoice?
  7. Input 10% which is equivalent to $600 for each line.
  8. Then click Create invoice.
  9. Finally, click Save.

 

 

Additionally, once the  transaction is recorded, you can start processing the payment manually.

 

You can also consider reaching out to our QuickBooks Live expert Assisted team, they are available to assist you with recording progress invoices and addressing any QBO concerns.

 

Lastly, you can run the open invoices report to monitor the status of these long-term transactions once everything is set up.

 

Please let us know if you have further questions about recording rental transactions in QBO. You can use the Reply button and we'll respond to you anytime.

Rainflurry
Rainflurry
March 1, 2025

@Annamaria1923 

 

The advice given by @ArielI doesn't work.  It will create BOTH an invoice for $6,000 and a yearly recurring invoice for $600.  That's obviously not correct.  Do QB employees go through training on this stuff? 

 

It's not proper accounting to recognize the whole contract amount in your financials.  Rent revenue is recognized on a straight-line basis over the lease term ($600/year  X 10 years).

A
Annamaria1923Author
March 2, 2025

Dear Rainflurry,

Thank you for your help.

I wonder if it wouldn't be better to register it as follows:

 

To register the whole renting agreement

                                                         Debit                                Credit

Pending deferred revenue                6,000

Deferred rental revenue                                                          6,000

 

To register yearly rental collection:

 

Deferred rental revenue                   6,000                              

Pending deferred revenue                                                      6,000 

 

Accounts receivable (invoice)             600

Rental income (invoice)                                                            600

 

Bank account                                     600

Accounts receivable                                                                 600

 

Best, 

Annamaria

Rainflurry
RainflurryAnswer
March 2, 2025

@Annamaria1923 

 

Your first two entries cancel each other out, and the last two are the same as creating a monthly invoice and then receiving payment on that invoice.

 

To reiterate, it's improper lease accounting to recognize the full $6,000 contract amount on your balance sheet if this is an operating lease (presumably it is).  Just create the $600 yearly invoice and receive payment on it.

 

From PWC (link here):

If a lease is classified as operating, the lessor should keep the asset underlying the lease on its balance sheet and continue to depreciate the asset based on its estimated useful life. Rental revenue from lease payments should be recognized on a straight-line basis (or another systematic basis if that basis is more representative of the pattern in which income is earned from the underlying asset over the term of the respective lease).

 

       

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