Van - Finance or Operations Lease

How to record a new van

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Hi

I am not sure how to record a new van in the business.  The agreement is for 36 months at which point it is handed back.  A deposit has been paid equal to 9 monthly payments and then a further 35 monthly payments.  Am I correct in thinking that this will be classed as an operating lease as it is being given back and I therefore do not need to record it as an asset?

Also how do I record the intial deposit and the monthly payments in the accounts?

Thank you

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By rhino83
22nd Jun 2017 15:46

The accounting treatment depends on a number of factors and without any figures its difficult to know.

It also depends on which standard your preparing the accounts under, is it SSAP 21, FRS 102/105 or even IFRS's

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Replying to rhino83:
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By She11
22nd Jun 2017 15:55

The deposit is £2065 and monthly payments of £229. I'm just doing the book keeping for the business, but the accountant prepares under FRSSE if that helps?

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By rhino83
22nd Jun 2017 16:03

It's probably an operating lease then, but depends on the value of the van.

Put the entire amount to operating leases expense and the accountant can sort it out at the end.

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By She11
22nd Jun 2017 16:11

Great, thanks for your help.

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By tom123
22nd Jun 2017 16:03

45 monthly payments for 36 months use - that sounds a bit sharp practice!

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By She11
22nd Jun 2017 16:13

ha ha it does

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By newstarter01
22nd Jun 2017 16:14

Thats normal practice for operating leases. The more advance rentals you pay the lower the subsequent monthly lease payments are. Then you might get the chance to buy the car at the end of the lease. Usually mileage limits apply too. Sounds like operating lease with the info provided.

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By She11
22nd Jun 2017 16:22

Yes they have been mileage restrictions... Thanks for the info.

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