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