Accounting for Operating Leases
From
a bookkeeping perspective, operating leases are
the easy ones to handle. The periodic lease
payment is simply treated as an expense of the
period in which it is paid. For example, if the
lease payment were $350 per month (ignoring
taxes), the entry would be
DR
Equipment lease $350.00
CR Bank $350.00
There
would be no assets or liabilities set up on the
balance sheet, even though an asset exists along
with a liability to make payments for the term of
the lease. This is called" off-balance sheet"
financing.
Reconciling the Loan Balance
Although
the amortization tables should produce the
correct loan balance for you at the end of the year,
it's a good idea to double-check your balance
against the loan statement you receive from your
bank. If your bank doesn't produce a loan statement,
verbal confirmation from them is fine.
If
your balance differs from the bank balance, first
check to make sure you have recorded all of the
entries from the amortization table. If you have,
and your balance and the bank's still differ, ask
your bank to print off the activity on the loan for
the year. Compare the print off to what you have
posted and work with the bank and your accountant to
find the differences.
Accounting for Operating
Leases and Reconciling the Loan Balance