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?