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Debit: Lease Receivable
Credit: Lease Income
Create a Bank/Cash Receipt document with the Transaction Type set to Other. Include the following entries in the document:
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In the Payment details tab, add the Lease receivable Gl and the company details. Once filled, the entry below will be created.
Debit: Cash on Hand
Credit: Lease
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Receivables
This ensures that the receipt properly records the cash collection against the previously recognized lease receivable.
2. Finance Lease (Lessor)
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of the underlying asset.
- At lease commencement, the lessor removes the leased asset from the balance sheet by creating a Fixed Asset Sale document. The journal entry is:
Dr
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Lease Receivable - records the amount to be collected from the lessee under the finance lease.
Cr
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Asset (carrying amount of leased asset) - removes the leased asset from the balance sheet based on its net book value.
Cr
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During the lease term, interest income Gain - the difference between the Fixed asset cost and the selling amount (2,000 AED) is recognized as profit.
Interest income should be recognized over the lease term. The interest earned on the lease receivable is
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recorded using the
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Other Operating Income document, which is created with the Transaction Type
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: Accrual. The accounting entry should be
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:
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Debit: Lease Receivable
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Credit:
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Lease Income
When
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the lessee makes a payment, a Bank/Cash Receipt document is created
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using Transaction Type
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: Others, and the lease receivable is
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entered in the Payment Details tab. The accounting entry is:
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Debit: Cash
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Credit: Lease Receivable
The lessor recognizes records a receivable equal to representing the lease’s net investment in the lease. Finance income is recognized over the lease term using in a pattern way that reflects produces a constant periodic rate of return on the net investment. (Interest should be recorded manually on a periodic basis.)
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