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Hello,
I have watched your lecture on Finance Leases and although I understand how to do the calculations I am confused over the double entry for the example given.Where does the other side of the receivable go? I am guessing it is income and some of it will be deferred in the SOFP?
Please can you clarify the Dr and Cr entries.
Many thanks for your help.
CatherineIf the lessor buys the asset then immediately starts the finance lease:
Dr Receivable Cr Cash (paid to the vendor of the asset)
If the lessor already owns the asset:
Dr Receivable Cr PPE (in this case there may be a difference – if, for example, the CA of the PPE is not the same as the opening receivable. Any difference goes to P&L.
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