The accounting varies for the lessee depending on whether or not he or she is classified as a financial or operating lessee We are interested in the accounting treatment from the lessee's point of view (defined in the PCGA GUIDE on pages 26.01 to 26.54). The following chart shows an example of the accounting treatment for operating leasing and capital for each of the contracting parties.
Lessee
OPERATING METHOD:
RECORD:
XXXX
INCOME EXPENSES
XXXX
CASH (OR INCOME PAYABLE)
Capital or Financial Leasing Method
RECORD:
LEASED EQUIPMENT
XXXX
LEASES PAYABLE
XXXX
Lease contract and capitalization of the current value of the minimum payments
INTEREST EXPENSES
XXXX
LEASES PAYABLE
XXXX
BANKS
XXXX
Lease contract and incurred interest expense
LEASED ASSET DEPRECIATION
XXXX
ACCUMULATED LEASED ASSET DEPRECIATION
XXXX
Leased asset depreciation based on the company's normal practices
ASSET
XXXX
ACCUMULATED LEASED ASSET DEPRECIATION
XXXX
LEASED ASSET
XXXX
ACCUMULATED ASSET DEPRECIATION
XXXX
BANKS
XXXX
Equipment purchase at contract end
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