How do I handle monthly lease prepayments?

This article describes how to handle monthly pre-payments.

We recently received this question from a firm partner: Our client prepays their lease in advance (e.g., for the June lease, they must pay no later than May 25th). How can I enter this “early payment date” in the LeaseCrunch?

When you are paying early, we recommend using the clearing account as you would when making a regular payment.

For the payment made on May 25 processed through your clients AP system (Entry will depend on Cash or Accrual method):

DR Clearing Account

CR Cash

For the monthly LeaseCrunch Journal Entry (Entry shown is based on Operating Lease):

DR Operating Lease Expense

CR ROU Asset

CR ST Lease Liability

CR Clearing Account

The clearing account will reconcile to zero once the monthly journal entry is posted. It's important to reconcile the clearing account on a regular basis noting that when payments are made on a different schedule than what is referenced in the lease document, there will be an unreconciled balance.