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How to treat lease or rental equipment

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When a rental company purchases equipment for rental, do you enter them in the P&L as purchases as well as the balance sheet as Assets? how do you make entries? 

  

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By hirshad
28th Sep 2016 15:40

I assume they're fixed assets which they're going to rent out to customers so they should be in the balance sheet. Rental income would be sales. You'd account for depreciation. So long as the equipment had been bought outright, there wouldn't be any further entries.

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By Manchester_man
28th Sep 2016 20:51

You cannot enter something as purchases in the P&L and also enter then as assets in the balance sheet.

If you're using double entry, it's one or the other!

The answer has been provided above, however.

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By DMGbus
28th Sep 2016 21:48

A few decades ago I worked on the audit of a company that hired out fork lift trucks. They were capitalised and depreciated as fixed assets and, most importantly, given fleet numbers to keep track of them in a plant register.

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By In a Daze
29th Sep 2016 10:49

If you have purchased assets for hiring them out, they would go in the balance sheet only. obviously depreciation would be charged in the P&L.

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