2007-07-17 20:14:00 · 4 answers · asked by Preeth U 1 in Business & Finance ➔ Other - Business & Finance
You can use IAS 17 Leases as a guide. Leases are usually of 2 types - operating lease and capital (or finance) lease.
Operating lease rentals are written off to the income statement as and when incurred.
Dr Operating lease rental (expense item)
Cr Cash
You do not have title to the asset. You return the asset at the end of the lease period (in your case, 2 yrs). Sometimes there is a purchase option at the end of this period, i.e. you pay an additional small amt and the asset is yours. You then capitalise that small amt. as that amt has been calculated to reflect the worth of the asset by that time.
A capital lease is treated as an asset with payment by instalments. The corresponding credit entry is Lease Obligations a/c or Hire-purchase creditors depending on where you're from. Every time you pay an instalment you have to break it up into 2 parts - repayment of principal and an interest element.
You have to examine the contract you signed for this car you've rented. Your a/cg has to reflect the legal form. If you signed an operating lease agreement and you wish to convert it to a capital lease, you have to meet up with the supplier and negotiate for a conversion and other terms and conditions.
2007-07-17 21:46:33 · answer #1 · answered by Sandy 7 · 0⤊ 0⤋
Not unless it is a capital lease - and that is highly unlikely
2007-07-18 02:34:12 · answer #2 · answered by Maggie Jeans 3 · 0⤊ 0⤋
I'd say it's a liability.
You don't own it, and you have a debt to be able to use it.
2007-07-17 20:21:17 · answer #3 · answered by CommonCents 4 · 0⤊ 0⤋
Was wondering this too
2016-07-29 09:46:51 · answer #4 · answered by Martina 3 · 0⤊ 0⤋