BLM14045 - Lease accounting: finance lease accounting: finance lessors: accounting example
Continuing the example in BLM14040, the accounts will show the following figures:
Year | Gross earnings | Net Investment in lease at Start of year | Reduction | Net Investment in lease at End of year |
---|---|---|---|---|
1 | 1,100 | 10,000 | 598 | 9,402 |
2 | 1,035 | 9,402 | 663 | 8,739 |
3 | 962 | 8,739 | 736 | 8,003 |
4 | 880 | 8,003 | 818 | 7,185 |
5 | 790 | 7,185 | 908 | 6,277 |
6 | 690 | 6,277 | 1,008 | 5,268 |
7 | 579 | 5,269 | 1,119 | 4,150 |
8 | 456 | 4,150 | 1,242 | 2,908 |
9 | 320 | 2,908 | 1,378 | 1,530 |
10 | 168 | 1,530 | 1,530 | 0 |
Total | 6,980 | 10,000 |
The lease rentals receivable, £1,698 a year, are not shown in the accounts as such, but are apportioned between the gross earnings (the ‘interest’ element) and the reduction in the net investment in the lease (the ’repayment’ element). For example:
Year 1 - 1,100 + 598 = 1,698
Year 2 - 1,035 + 663 = 1,698