Finance lease

Kella

A client has just acquired a new van on a finance lease, I have never had to account for a finance lease before and I am going round in circles trying to find information on the transactions that need to go in the accounts - any advice would be appreciated

davealucas

The van will need to be treated as a fixed asset and written down (depreciated) over the term of the lease at it's normal purchase value.

Payments for the lease will need to be treated as a liability (almost like a loan) repayable over the term of the lease.

The difference between the value of the van and the lease repayments will effectively be treated as interest payments through the revenue accounts.