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How should you record cash received from a subleasing...
RP - Thread posted October 2, 2009 by Debbie Cotts
672 Views, 2 Comment
Title:
How should you record cash received from a subleasing arrangement?
Content:
Currently I have several office locations that we are sub-leasing to tenants because we move out of the office that location. I pay the landlord for the rent on our offices then send a monthly invoice to the tenant for their portion of the rent. The tenants will send us a check. I am debating the appropriate way to record this income on our books. Should it be recorded as rental revenue or applied to our office rent expense account?
Comment
I believe that you've to account it as revenues, since you've 2 seperate agreements here, for example if your tenant didn't pay you, you still should bear the expense. it's a commitment that you've to fullfill. and you may make a footnote that this rental revenues is resulting from subleasing contracts.
I hope that's useful
I think either way is fine and would not violate GAAP. I think the preference depends on how you want to view your financial records. In my experience I have recorded sublease rent in other income (since the company I was working for was not in the real estate business) and kept the rent expense line item clean. This way, when we enterred into a period where the building was not sublet our expenses didn't show a huge jump. It also made reconcile the rent expense easier becuase I knew off the top of my head what our expense was and not have to remember the changes in sublease rents collected.
Hope that helped.