How Do You Account For An Equipment Lease?
Many business owners choose to lease equipment for their business rather than purchase the equipment. Leasing equipment allows a business owner to avoid a large initial cash outlay, to maintain equipment that is always under manufacturer warranty, and to upgrade equipment when needed without absorbing losses on sales of outdated company-owned equipment. Accounting for an equipment lease is no different than accounting for any other regular, monthly, business expenditure. Pay the monthly equipment lease amount by check, bank transfer, cash or other payment method your business uses. Record a reduction to the bank account used to make the lease payment to reflect the outflow of cash to the leasing company. A reduction to cash in general ledger terms is a “credit.” Record an expense to the appropriate expense account established for the equipment leasing cost. For example, a copier might be an “Office Equipment” expense. An increase to expenses in general ledger terms is a “debit.” File t
