When the revenue is usually recorded?

Transaction recorded as an asset vs. expense vs. revenue?

• With regards to recording an AJE: On October 1, Alpha’s bookkeeper recorded the cash prepayment of $12,000 rent for one year as an asset. debit pre-paid rent (the asset) 12000 credit cash 12000 AJE: Dec 31 of same year debit rent expense 2000 credit pre-paid rent 2000 Don't you always record a pre-paid as an asset? Can someone explain to me the diff between recording it as an asset, revenue, or expense...Thanks in advance

• Answer:

  The prepayment can't be a credit so it can't be revenue. The credit goes to cash, you reduced cash. You can't deduct the entire expense at one time. It's like an investment (prepaid rent) which is an asset on your balance sheet. Assets carry a debit balance so as you use it, you credit the asset account, debiting the expense. Good luck.