Answer:
Record receipt with a credit to the rent revenue account
Any unused portion of the prepayment still existing at the end of the period will be transferred to the Unearned rent account
Explanation:
Prepaid rent is an income that is to be earned at a future date. Since income is normally recorded as a revenue when it is earned, we usually credit Unearned Rent account.
However financial statements are made at end of a defined period (for example monthly, quarterly, biannually, or yearly).
The journal entry can be credited to the Rent Revenue account directly. At the end of the period the amount earned is retained in the account, and the unearned portion of the prepaid rent is transferred to the Unearned Rent account.
So financial statements will only recognise earned income when prepared.
