The accounting entries of the lessee mainly include:
1. Initial measurement of lease liabilities;
2. Initial measurement of right to use assets;
3. Subsequent measurement of lease liabilities;
4. The specific accounting entries for the subsequent measurement of the right to use assets are as follows:
Initial measurement of lease liabilities
The lease liabilities shall be initially measured according to the present value of the unpaid lease payments on the lease term beginning date. Identifying relevant payment items that should be included in lease liabilities is the key to measuring lease liabilities.
(1) On the beginning date of the lease term, the lessee recognizes the lease liability, and the accounting entry is as follows:
Debit: right of use assets (present value of unpaid lease payments)
Lease liabilities - unrecognized financing expenses (difference between unpaid lease payments and their present values)
Credit: lease liabilities - lease payments (unpaid lease payments)
(2) When the lessee recognizes the interest of each period within the lease term, the accounting entry is:
Debit: financial expense - interest expense
Credit: lease liabilities - unrecognized financing expenses
(3) When the lessee pays the lease payment, the accounting entry is:
Debit: lease liabilities - lease payments
Credit: bank deposit
Initial measurement of right to use assets
The right of use asset refers to the lessee's right to use the leased asset during the lease term. On the beginning date of the lease term, the lessee shall initially measure the right to use assets at cost.
(1) On the beginning date of the lease term, the lessee recognizes the right of use asset, and the accounting entry is:
Debit: right of use assets (present value of unpaid lease payments)
Lease liabilities - unrecognized financing expenses (difference between unpaid lease payments and their present values)
Credit: lease liabilities - lease payments (unpaid lease payments)
(2) When the lessee confirms that the lease payment amount is paid before the start date of the lease term (deducting the lease incentives already enjoyed), the accounting entry is:
Debit: right of use assets
Credit: advance payment
(3) The lessee recognizes the initial direct expenses incurred, and the accounting entries are:
Debit: management expenses
Credit: bank deposit
(4) The lessee credits the account of "estimated liabilities" according to the present value of the costs that are expected to occur to dismantle and remove the leased asset, restore the site where the leased asset is located, or restore the leased asset to the state agreed in the lease terms.
Debit: right of use assets
Credit: estimated liabilities
Subsequent measurement of lease liabilities
(1) After the beginning date of the lease term, when the lease liability increases, the accounting entry is:
Debit: right of use assets (increase in present value of lease payments)
Lease liabilities - unrecognized financing costs (the difference between the increase in the present value of lease payments and the increase in lease payments)
Credit: lease liabilities - lease payments (increase in lease payments)
(2) After the beginning date of the lease term, when the lease liability decreases, except for the situation shown in (3) below, the accounting entry is:
Debit: lease liabilities - lease payments (decrease in lease payments)
Lease liabilities - unrecognized financing costs (the difference between the decrease in the present value of lease payments and the decrease in lease payments)
Credit: right of use assets (decrease in present value of lease payments)
If the book value of the right of use asset has been reduced to zero, the accounting entry is:
Debit: lease liabilities - lease payments (lease payments to be further reduced)
Credit: operating costs/manufacturing expenses/selling expenses/administrative expenses/R&D expenses, etc. (present value of lease payments to be further reduced)
Lease liabilities - unrecognized financing costs (the difference between the amount of lease payments to be further reduced and the present value of the amount of lease payments to be further reduced)
(3) The lease change results in the reduction of the lease scope or the shortening of the lease term, and the accounting entry is:
Debit: lease liability - lease payment amount (according to the corresponding proportion of reduction or shortening)
Accumulated depreciation of right of use assets (according to the corresponding proportion of reduction or shortening)
Provision for impairment of right to use assets (according to the corresponding proportion of reduction or shortening)
Credit: lease liabilities - unrecognized financing expenses
The difference between debit and credit is debited or credited to the "asset disposal profit and loss" account.
Subsequent measurement of right to use assets
(1) The depreciation of the right of use asset is recognized, and the accounting entry is:
Debit: manufacturing expenses/administrative expenses/financial expenses/other business costs, etc
Credit: Accumulated depreciation of right of use assets
(2) If the right of use asset is impaired, the accounting entry is:
Debit: asset impairment loss
Credit: provision for impairment of use right assets
(3) When an enterprise subleases an asset with the right of use to form a financial lease, the accounting entry is:
Debit: finance lease receivables
Accumulated depreciation of right of use assets
Provision for impairment of right to use assets
Credit: right of use assets
The difference between debit and credit is debited or credited to the "asset disposal profit and loss" account.
How to make accounting entries of operating lease lessee
Debit: management expense rent;
Credit: bank deposit.
The leased assets of the lessee cannot be accounted for as the assets of the enterprise, and only the rent needs to be paid on schedule. Generally, the rent paid should be included in the expense evenly within the lease term.
In the operating lease, the lessee leases the assets to meet the temporary needs of the operation, and does not involve the transfer of risks and rewards of the ownership of the main assets, nor does it have a special right to purchase the leased assets.
Accounting treatment regulations for the lessor:
1. Assets for operating lease shall be accounted separately from fixed assets for self use.
2. The depreciation and maintenance costs of leased fixed assets shall be treated according to the accounting method of depreciation and repair of fixed assets for self use.
3. The depreciation of fixed assets under operating leases should be accounted for separately, but the repair costs of operating lease assets should be accounted for in a detailed account in the "operating expenses" account.
Extended data
The rent or deposit can be divided into the following situations:
1. Regular rent payment
According to the lease contract, the lessee pays a fixed amount of rent for a certain period (such as monthly, quarterly, semi annual or annual), or the rent is calculated according to a certain standard (such as the royalty rate of the sales of the products produced by using the leased equipment).
The corresponding accounting treatment is to recognize the rent actually paid or accrued on the accrual basis as the rent expense and include it in the current profits and losses.
2. Prepaid rent or deposit
Sometimes the lease contract may stipulate that the lessee shall prepay a sum of money, which may be used for three purposes:
As prepaid rent to offset the rent of the last period or several periods
As prepaid rent, used to pay additional rent in addition to the rent paid regularly
It shall be used as the security deposit (or deposit) for the performance of the lessee, and shall be returned in full upon the expiration of the lease term.
How does the lessee make accounting entries for operating leases
The lessee's accounting entries for operating leases.
When paying the rental fee.
Debit: other payables.
Credit: bank deposit.
Upon receipt of the invoice, it shall be amortized monthly within the lease term to prepare an amortization table.
Debit: administrative expenses.
Debit: manufacturing expenses, etc.
Debit: tax payable - VAT payable - input tax amount.
Credit: other payables.
Other payables refer to the amount payable or temporarily received from other units or individuals, such as the rent payable for fixed assets leased for operation, the rent payable for leased packaging materials, and the deposit deposit. The scope of accounting for other payables includes: deposit deposit; Payables and temporary receipts from affiliated units and individuals Rent of fixed assets and packaging materials leased for operation; Other payables and temporary receipts.
How to make lease accounting entries
1、 The lessee's treatment of financial lease:
Start date of lease term:
Debit: Fixed assets - fixed assets under financing lease (the lower one is the fair value of the leased assets or the present value of the minimum lease payments)
Unconfirmed financing costs
Credit: long-term payables - finance lease payments payable (minimum lease payments)
Determination of discount rate (when calculating the present value of the minimum lease payment, the discount rate can be determined in the following order).
1. The lessor's interest rate implicit in the lease;
2. The interest rate specified in the lease contract;
3. Bank loan interest rate in the same period.
2. Treatment of initial direct expenses - handling fees, attorney fees, travel expenses, stamp duty, etc., included in the value of leased assets:
Debit: fixed assets - fixed assets under financing lease (initial direct costs)
Credit: bank deposit, etc
The allocation of unrecognized financing costs shall be handled by the effective interest method.
Amortization amount of unrecognized financing costs in each period=(opening balance of long-term payables in each period - opening balance of unrecognized financing costs) × effective interest rate
Determination of assessment rate:
If the lessor's interest rate implicit in the lease is used as the discount rate to discount the minimum lease payment, and the present value is used as the entry value of the leased asset, the interest rate implicit in the lease shall be used as the apportionment rate of unrecognized financing costs.
If the minimum lease payment is discounted at the interest rate specified in the contract, and the present value is taken as the entry value of the leased asset, the interest rate specified in the contract shall be taken as the apportionment rate of unrecognized financing costs.
If the minimum lease payment is discounted at the bank loan interest rate for the same period, and the present value is taken as the entry value of the leased asset, the bank loan interest rate for the same period shall be taken as the apportionment rate of unrecognized financing costs.
With the fair value of the leased asset as the entry value, the apportionment rate shall be recalculated. The amortization rate is the discount rate that makes the present value of the minimum lease payment equal to the fair value of the leased asset.
Accounting treatment:
Debit: long-term payables - finance lease payables
Credit: bank deposit
Debit: financial expenses
Credit: unconfirmed financing costs
Accrual of depreciation of leased assets.
Determination of total accrued depreciation:
If there is guarantee residual value: total depreciation payable=recorded value of fixed assets under financing lease - guarantee residual value
If there is no guarantee residual value: total depreciation payable=recorded value of fixed assets under financing lease
Depreciation Period:
1. If it can be reasonably determined that the lessee will acquire the ownership of the leased asset when the lease term expires, it can be considered that the lessee has the full service life of the asset, so the service life of the leased asset on the lease start date should be taken as the depreciation period;
2. If it is impossible to reasonably determine whether the lessee can obtain the ownership of the leased asset after the lease term expires, the shorter of the lease term and the life of the leased asset shall be taken as the depreciation period.
Accounting treatment of performance costs - performance costs are usually directly included in current profits and losses when incurred.
Debit: management expenses, etc
Credit: bank deposit
Accounting treatment of contingent rents - recognized as current profits and losses when actually incurred.
Contingent rent is calculated on the basis of sales percentage, usage, etc.
Debit: sales expenses
Credit: bank deposit
Contingent rent calculated on the basis of price index:
Debit: financial expenses
Credit: bank deposit
Accounting treatment when the lease expires:
Return of leased assets
1. Remaining value guaranteed by the lessee:
Debit: accumulated depreciation
Debit: long-term payables - finance lease payables
Credit: fixed assets - fixed assets under financing lease
2. There is no residual value guaranteed by the lessee:
Debit: accumulated depreciation
Credit: fixed assets - fixed assets under financing lease
Preferential renewal of leased assets:
If the lessee exercises the option of preferential lease renewal, it shall be deemed that the lease has always existed and make corresponding accounting treatment.
If the lessee fails to renew the lease when the lease term expires, it shall pay the liquidated damages.
Debit: Non operating expenses
Credit: bank deposit
Leased assets retained for purchase
When paying the purchase price:
Debit: long-term payables - finance lease payables
Credit: bank deposit
Carry forward ownership of fixed assets:
Debit: fixed assets - fixed assets for production
Credit: fixed assets - fixed assets under financing lease
2、 The lessor's treatment of financial lease:
Start date of lease term
The entry value of financing lease receivables=minimum lease receipts+initial direct costs
Calculation of unrealized financing income
Unrealized financing income=(minimum lease receipt+initial direct cost+unguaranteed residual value) - (present value of minimum lease receipt+present value of initial direct cost+present value of unguaranteed residual value)
Accounting treatment:
Debit: long-term receivables (minimum lease receipts+initial direct expenses)
Unsecured residual value
Non operating expenses (difference between the fair value of financial leasing assets and the book value)
Credit: financial leasing assets (original book value)
Bank deposit (initial direct cost)
Non operating income (the difference between the fair value of financial leasing assets and the book value)
Unrealized financing income
Accounting treatment of unrealized financing income distribution:
Distribution method - it is distributed according to the effective interest rate method.
Amortization amount of unrealized financing income in each period=(opening balance of long-term receivables in each period - opening balance of unrealized financing income) × interest rate implicit in lease
Accounting treatment:
According to the rent received:
Debit: bank deposit
Credit: long-term receivables
According to the amount of financing income that should be recognized in the current period:
Debit: unrealized financing income
Credit: rental income
Provision for bad debt reserves of finance lease receivables:
The lessor only needs to make reasonable provision for bad debt reserves for the difference between the financial lease receivables and unrealized financing income (the part equal to the principal in amount), instead of making full provision for bad debt reserves for the financial lease receivables.
The accounting treatment for withdrawing bad debt provision for financial lease receivables is the same as that for withdrawing bad debt provision for accounts receivable.
Accounting treatment for changes in unguaranteed residual value:
End of period
The difference between the estimated recoverable amount of unguaranteed residual value and its book value
Debit: asset impairment loss
Credit: provision for impairment of unguaranteed residual value
The difference between the amount of impairment and the resulting decrease in net lease investment
Debit: unrealized financing income
Credit: asset impairment loss
The unguaranteed residual value of the confirmed loss is recovered:
Amount recovered according to unguaranteed residual value
Debit: provision for impairment of unguaranteed residual value
Credit: asset impairment loss
The difference between the original impairment amount and the resulting increase in net lease investment:
Debit: asset impairment loss
Credit: unrealized financing income
Accounting treatment of contingent rent:
The lessor shall recognize the contingent rent as the current income when it actually occurs
Debit: accounts receivable
Credit: rental income
Accounting treatment when the lease expires:
Recovery of leased assets:
There is guaranteed residual value (there is balance in long-term receivables), and there is no unguaranteed residual value (there is no balance in unguaranteed residual value)
Debit: financial leasing assets
Credit: long-term receivables
Compensation for value loss that should be collected from the lessee:
Debit: other receivables
Credit: non operating income
There are guaranteed residual values and unsecured residual values:
Debit: financial leasing assets
Credit: long-term receivables
Unsecured residual value
Compensation for value loss that should be collected from the lessee:
Debit: other receivables
Credit: non operating income
There is no guaranteed residual value, but there is unguaranteed residual value:
Debit: financial leasing assets
Credit: unguaranteed residual value
There is neither guaranteed residual value nor unguaranteed residual value - no accounting processing, just for future reference registration.
Preferential renewal of leased assets:
If the lessee exercises the preferential renewal option, it is deemed that the lease has always existed and corresponding accounting treatment is made
If the lessee does not renew the lease when the lease term expires - the accounting treatment for the lessee to return the asset is the same as the accounting treatment for recovering the leased asset.
Leased assets retained for purchase:
Upon receipt of the purchase price:
Debit: bank deposit
Credit: long-term receivables
If there is unguaranteed residual value
Debit: Non operating expenses
Credit: unguaranteed residual value
Extended data Finance lease means that the lessor, according to the specific requirements of the lessee for the leased object and the choice of the supplier, invests to purchase the leased object from the supplier and leases it to the lessee for use, and the lessee pays the rent to the lessor in installments. During the lease term, the ownership of the leased object belongs to the lessor, and the lessee has the right to use the leased object.
At the end of the lease term, after the rent has been paid and the lessee has fulfilled all its obligations in accordance with the provisions of the finance lease contract, if there is no agreement or the agreement is unclear about the ownership of the lease item, it can be supplemented by agreement; If no supplementary agreement can be reached, it shall be determined in accordance with the relevant provisions of the contract or the transaction customs. If it is still uncertain, the ownership of the leased object shall belong to the lessor.
Financial leasing is a new financial industry integrating financing and material, trade and technology upgrading. Because of its combination of financing and financing, the leasing company can recover and dispose of the leased goods when problems arise, so the requirements for enterprise credit and guarantee are not high when financing, so it is very suitable for SMEs to finance.
