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
Replies (8)
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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
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.
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.