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HMRC internal manual

Business Leasing Manual

Lease accounting: finance lease accounting: finance lessees: example 1: lease terminated early - reconciliation of lessee's cash outlay

On the basis of the information at BLM15540 and BLM15545 the total cash outlaid by the lessee can be reconciled with the charges made to its profit and loss account over the period of the lease until it is terminated to the to profit and loss account, as follows:

Cash position  £
Rentals paid for primary period: 4 x £12,400 = 49,600
Rebate received (29,100)
Net outlay 20,500
Charge to Profit and Loss Account   
Depreciation: 4 x £2,500 = 10,000
Finance charges 11,200
plus extra on disposal 400
Profit on sale (1,100)
Net charge 20,500