Finance Lease Accounting Journal Entries

The finance lease accounting journal entries below act as a quick reference, and set out the most commonly encountered situations when dealing with the double entry posting of finance or capital leases.

In each case the finance lease accounting journal entries show the debit and credit account together with a brief narrative. For a fuller explanation of journal entries, view our examples section.

Typical Finance Lease Accounting Journal Entries

To record a fixed asset funded by lease finance and a cash deposit
Account Debit Credit
Fixed assets XXX
Lease liability XXX
Cash XXX

Journal entry to record depreciation
Account Debit Credit
Depreciation expense XXX
Accumulated depreciation XXX

To record a rental payment split between principal and interest
Account Debit Credit
Lease Liability XXX
Interest XXX
Cash XXX

A Note on Operating Leases

The other form of lease is an operating lease, in this case the rental payments are simply recorded on a straight line basis as operating expenses.

Operating lease rental payment
Account Debit Credit
Rental expense XXX
Cash XXX

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