Finance Lease Accounting Journal Entries

Michael Brown

13 years ago

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 December 13th, 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.