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Because the lessor still owns the asset, it continues to depreciate just like any other asset they use in their business. The lease payments received are treated as rental income and are usually recognized evenly over the lease term (straight-line basis). It can record in below ways.

a) When Lease Payment is Received (or Receivable)

• If cash is received, create a cash receipt document with transaction type Others, and GL can be finance income (User can create a new GL

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Dr Cash
Cr Lease (Rental) Income

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If payment is receivable, create an Other income document with transaction Type Accrual

Dr Lease Receivable
Cr Lease (Rental) Income

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• and separate the lease income from other finance income)

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The entry below will be created

Debit: Cash
Credit: Lease Income

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• If a payment is expected but the cash will be collected at a later date, set up a new GL account under Current Financial Assets and generate an Other Income document with the Transaction Type set to Accrual. The journal entry should be:

Debit: Lease Receivable

Credit: Lease Income

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Create a Bank/Cash Receipt document with the Transaction Type set to Other. Include the following entries in the document:

• Debit: Lease Receivable

• Credit: Lease Income

This ensures that the receipt properly records the cash collection against the previously recognized lease receivable.

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