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Record the lease liability and right-of-use (ROU) asset at the start of a lease.
Create General Ledger (GL) accounts named as Right of Use (ROU) assets under Non-current assets.
Create an Inventory Item-Set up an inventory item and select the "Right to Use" GL account from the Edit GL Accounts option.
Create an invoice received document. In the main tab, enter the required details and select the Current Finance Lease Liabilities GL under the Accounts Payable column.
In the inventory tab, add the item and complete the necessary details.
Once filled. post the document.
The below entry will be created. Dr Right to use
Cr Current finance lease liabilities.
Step 2: Recognize the Unwinding of the Lease Liability and Amortization of the Right-of-Use Asset
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Recognize any lease payments made during the period, which will reduce the lease liability. Create a cash/Bank payment document with transaction type Others.
In the Bank payment tab, choose Current finance lease liability GL, and choose the company and contract. Review the document and post the transaction.
The below entry will be created
Dr Current finance lease liabilities
Cr Bank accounts
2. Amortization of the Right-of-Use Asset
Depreciation for a lease is typically recorded under the Amortization Expense, reflecting the expense related to the right-of-use (ROU) asset. it is categorized under Operating Expenses on the income statement.
Create a new GL under operating expense GL
Create an expense entry to record the Depreciation.
Go to Accounting > Other Expenses document:
Create a new document, select the accrual option in the main tab, and choose the relevant entity.
Add the Amortization Expense GL on the debit side of the document, and on the credit side, include the Right-of-Use GL.
The entry will be Dr Amortization expense (Lease)
Cr Right to use 
2. Interest Accrued
Recognize the interest expense on the lease liability, which represents the borrowing cost. Create a new Other Expense document.
In the main tab, select the accrual option and choose the appropriate entity.
In the expense tab, add the Financial Expense GL on the debit side and the Current Finance Lease Liabilities on the credit side of the document.
The below entry will be created.
After all the above entries, the financial statements will reflect the following effects:
- Income Statement:
- Increased Expenses: Amortization and interest expenses will reduce net income.
- Balance Sheet:
- Assets: The Right-of-Use asset will decrease over time due to amortization.
- Liabilities: The Lease Liability will decrease as payments are made and interest is recognized.
Step 3: Continue to Record Journal Entries Until Lease Expiry
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