In the Books of Lessor

[maani]

In a Finance Lease, at inception of lease which will be the most appropriate entry in the books of lessor

DRLease payments recievable
CRSales

or

DRLease payments recievable
CRAsset

Ace

[Ali Akbar]

AOA

Lessor will make the entry opposite to that which the lessee do, that is to say
LESSOR
Lease payment recievables (Dr)
Asset (Cr)

Likewise other entries will be
Cash (Dr)
Interest income (Cr)
Lease payment recievables(Cr)

LESSEE
Asset (Dr)
Obligation under finance (Cr)
lease (UFL)

Interest exp (Dr)
Obliigation UFL (Dr)
Cash (Cr)

However the entries will be slightly different when the installment is payable in advance.

Hope ur question is answered.

ICAP IS THE BEST (If someone has problem with this phrase he can better meet me personally)

[syedhassan]

HI.. MANI..
SURE.. THE SECOND ENTRY IS CORRECT..
AS IN A LEASE CONTRACT, THE PROPERTY IS STILL IN THE NAME OF THE LESSOR, EVEN WHEN LEASED..
AND ONLY A LESSOR CAN CLAIM TAX RELIEF IN THE PROPERTY..
AS HE'S THE OWNER OF THE ASSET AND ALSO BEARS ITS REPAIR, MAINTAINANCE AND DACORATION AND ENHANCEMENT, tax and other capital and revinue expenditures
REGARDS..
SYEDHASSAN..

ACCA

[maani]

Thankz brothers,
But the 2nd entry that i mentioned in my original post is also present in Meigs n Meigs (ICAP's recommended book)...whats wrong wiht this one...

Ace

[syedhassan]

hi back...MAANi..
sure its an ASSET leased and the payment recieved for the contract..
lets move to the basic concept....!!
what is the nature of transaction A lease NEVER A SALE..
only the POSESSION IS TRANSFERED FROM LESSOR TO THE CLIENT.
not the ownership, BUT for SOME CONSIDERATION...(Like a rented property.. )
its been years, when i used MIEGS & MIEGS...
but, if its the ENTRY there, its surely correct.
regards...
syedhassan...



ACCA