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

To record periodic expenses
Account Debit Credit
Insurance expense XXX
Maintenance expense 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
Last modified April 9th, 2019 by Michael Brown

About the Author

Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years in all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.

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