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If there is an initial deposit in a finance lease …will that be charged from income statement ? If deposit is of $4000 and lease term is 4 years ..how will it be treated ?
The double entry is, very simply,
Dr Obligations under Finance Lease Account
Cr CashWhy do you think it has anything to do with statement of profit or loss?
Then from where are we going to charge this deposits with ? When its an operating lease , we charge the deposit money evenly over the lease term in the statement of profit and loss ..then Why not in finance lease ?
Because it’s not an expense – it’s the part payment towards the debt hat is the amount owed to the finance lease creditor.
The only expense in the context of finance leases is the finance lease interest and, in the case of a first installment paid in advance (what, in the UK, we call a deposit) there is no finance lease interest included.
(And, of course, the depreciation on the finance leased asset!)
Is that better?
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