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?
Replies (4)
Please login or register to join the discussion.
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.
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.
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.
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.