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Finance lease - total cost

I am capitalising the total cost of a finance lease on a vehicle and the opposite entry is the creditor, however I just want to clarify the treatment of 2 elements of the total cost, they are as follows:-

1. The finance cost - should this be a Dr to the asset or a monthly debit to the profit and loss account - or would either treatment be acceptable.

2. I have confirmed with the vat office that in my circumstances I am able to recover 50% of the vat. Again should I capitalise the remaining 50% or debit it to unrecoverable vat in the profit and loss account on a monthly basis. Same question - is either acceptable?

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By mark589
24th May 2011 16:02

answer

Yes finace cost should be Dr to P&L

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