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Journal Entries of Lease Example

 

Question on Our Website Chat box by Guest Student 

On 30 June 2021, Maraboi Ltd leased a vehicle to ToWanblut Ltd. 

Maraboi Ltd had purchased the vehicle on that day for its fair value of K89721. 

The lease agreement cost Maraboi Ltd K1457 to have drawn up and requires ToWanblut to reimburse Maraboi for annual insurance costs of K1050. 

Pass the journal entries in the books of ToWanblut Ltd.  and Maraboi Ltd

Answer by Me

1. Due to lease agreement, Maraboi Ltd is lessor and ToWanblut Ltd because vehicle on lease gave by Maraboi Ltd to ToWanblut Ltd.

2. K is Myanmar kyat currency name. 

Journal Entries in the Books of Lessee ( ToWanblut Ltd. )


1. For total amount of lease payable. 


In the beginning of lease

Vehicle  Account Debit  K89 721

Lease Payable Account Credit K89 721


At this amount Maraboi Ltd has bought same vehicle and because it has given to lease. Vehicle comes in the business as fixed Asset. So, vehicle account debit with K89 721 in books of ToWanblut Ltd. and  

Lease Payable Account  will credit because now same amount is of liability of ToWanblut Ltd.

because we have not give the lease life. So, we deem it is 75% lease life and lease as capital lease. 


In the end of first year and subsequent years.

For charging depreciation of fixed asset. Rate is not given. So, check income tax list and will apply on it as per your country tax laws. 


Depreciation Account Debit. 

Vehicle account Credit 

For repaying the liability of lease


Lease Payable Account Debit K1457

Bank Account Credit K1457

For paying the vehicle annual insurance reimburse expenses. 


Annual insurance reimburse  expenses account debit K1050

bank account K1050


Journal Entries in the Books of Lessor ( Maraboi Ltd)


For buying of vehicle

Vehicle account debit  K89 721

bank account credit  K89 721

For insurance expenses of vehicle

Insurance expenses account debit K1050

bank account credit K1050


1. For total amount of lease receivable as asset for giving his asset vehicle. 


In the beginning of lease


Lease receivable Account Debit K89 721

Vehicle  Account Credit K89 721

At this amount Maraboi Ltd has bought same vehicle and because it has given to lease. Vehicle goes from the business means fixed Asset has decreased. So, vehicle account credit with K89 721 in books of Maraboi Ltd  and  

Lease receivable Account  will credit because now same amount is of asset of Maraboi Ltd

because we have not give the lease life. So, we deem it is 75% lease life and lease as capital lease. 

In the end of first year and subsequent years.


For receiving the amount of lease in installments 

Bank Account debit K1457

Lease receivable Account Debit K1457


For receiving the vehicle annual insurance reimburse from lessee. 

bank account K1050

Annual insurance reimburse  account debit K1050

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Journal Entries of Lease

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Accounting Education: Journal Entries of Lease Example
Journal Entries of Lease Example
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