View Full Version : setting up account for equiptment lease
07-03-2003, 03:05 PM
Hi all, I have just drawn a blank, it must be because I have spent the last month refreshing my manual bookkeeping skills.
My question is this.
I have leased a computer, 2281.85 plus GST of 159.73, on 48 installments, interest to be, 1232.82. For a total cost of 3674.40. The monthly payments are $76.40, automatic withdrawal.
How do I set up the orginal costs in my balance sheet? How do I show the monthly payments in my expense? Do I need to create a journal entry everymonth to reduce the payment expense from my balance sheet?
Your assistance would be greatly appreciated.
07-03-2003, 09:51 PM
Hi again, I am looking for assistance to this question.
How do I set up a leased item in QB, ie. computer, leased for 48 periods, monthly installment payments of principal and interest.
I need to know, do I set up a current asset account? Lease payable account? Interest payable account? Computer Expense Payment Account? Can I use memorized transactions to record the monthly payments? Do I need to make a monthly JE to Lease Payable and Interst payable to reflect the monthly payment installment.
Ok, I think that about covers my question. A timely response would be greatly appreciated.
07-04-2003, 09:33 AM
There are at least 3 ways to book capital leases. Use the easy one as follows.
Debit : Fixed Assets > Equipment (Computer Equipment) for the Cost including tax.
Credit: Capital Lease Payable or Obligations Under Capital Leases - Long Term Liability and use a current portion if needed.
Run an amortization on the cost using the interest rate.
Each payment will have principal reduction and interest - Debit the Capital Lease Payable and Interest Expense; Credit the bank for the payment amount.
Book depreciation each month for an amount spread over the economic useful life you use for this type of equipment: Debit Depreciation expense, Credit Accum. Deprec.-Computer Equipment.
Basically, it is the same as a loan/financing agreement.
07-04-2003, 05:59 PM
The way that I do it is to make a journal entry expensing the lease expense. Then go to Edit/Memorize General Journal and fill in the appropriate info. Note that the original GJ is going to be the first month's payment, so make the number remaining to be 47. As far as on your balance sheet, why go to the effort for such a small amount of $?, just expense it monthly as shown above.
07-04-2003, 07:39 PM
Thank you Craig and Vinny for your responses, I am always suprised at the variety of responses that come out of asking a question.
I was getting confused because I was overthinking the situation. What I thought I would do for the expense was just create a cheque for the monthly payment and have it memorized to go through each month, then I wanted to create the asset account to show the actual computer, but couldnt remember if it was fixed or current as the amount wasnt a lot.
I didnt want to go to great detail with amortization or depreciation cause the accountant could deal with that at year end.
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