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We recently purchased a few computers but we are leasing to own over 48 month period. I am having trouble balancing the JE for the monthly payments.
I have put the original purchase price (total asset amount) into a "Lease Obligations" account. Then each month I have set up a JE to credit the Lease Obligation and Debit the "Computer Asset" Account. Where I am having trouble is balancing the actual payment that will come out of our account. Say it's $50, $50 will be credited to our bank account but I dont know where the debit should go.
If I put it back into lease obligations the total Lease will never decrease and if I put it in Computer asset it will double the amount.
any help would be apppreciated!
Solved! Go to Solution.
Computer asset should be a fixed asset type account
open the register for the loan account, make a new first entry, or edit what is there, the full amount of the purchase agreement should be entered as an increase, and select the computer fixed asset account in the account block and save
when you make payments, you use the loan account as the expense for the payment, check or credit card payment.
Journal entries should be the exception when using QB, they often do not work as you think they should, and they never work for inventory, when you use inventory type items. It is much better to use the forms on the home page the way QB is designed to be used.
Computer asset should be a fixed asset type account
open the register for the loan account, make a new first entry, or edit what is there, the full amount of the purchase agreement should be entered as an increase, and select the computer fixed asset account in the account block and save
when you make payments, you use the loan account as the expense for the payment, check or credit card payment.
Journal entries should be the exception when using QB, they often do not work as you think they should, and they never work for inventory, when you use inventory type items. It is much better to use the forms on the home page the way QB is designed to be used.
Can you show an example or illustration of this?
I'm not sure leased computer equipment should be recorded as a fixed asset . . . I think more questions would have to be asked. Is it an operating lease with a buy-out at the end, or is it a capital lease with a nominal $1 buy-out at the end or $0 buy-out at the end? Who is deemed to have the risk and material ownership? If you own the equipment outright at the end of the lease or have a $1 buy-out, then you assume the risk and material ownership and it is a capital lease. If you have no ownership at the end of the lease, then it could be safely called an operating lease.
If it's an operating lease, then the lease payments are simply expensed month by month, with the payment amounts and PST going to the lease expense account (not a liability account) and GST to input tax credit. Entry would be to decrease Bank account, and enter the lease expense account in the account block + applicable tax code.
If it's a capital lease, then yes, the computer should be recorded as an asset and depreciated accordingly. Then Rustler's instructions are correct. Just to perhaps make it clearer for you @vgotha , here are the steps if it is a loan or a capital lease if GST is included in the initial loan/lease amount:
It is perfectly acceptable and probably more common to just put $10,600.00 on one line to Computers.
Monthly lease payments would look like this if you're paying out of your bank account (or credit card):
Your Computer Lease Payable register will now look like this, and will continue to decrease with each monthly payment.
The Computer Asset account looks like this and will be reduced each year when you post your entry for Depreciation Expense (DR) and Accumulated Depreciation (CR).
The entries will be slightly different, if GST (and possibly PST) is NOT included in the total lease at inception, but rather is paid on each monthly lease payment. If this is the case, then your original journal entry would remain the same, except with no taxes, and can be entered directly into the Computer Lease Payable account register. When you enter your monthly lease payment from the bank or credit card, you simply use your tax codes to add applicable taxes to each payment.
I hope this helps - good luck!
An other situation. Purchase of a vehicle . Purchase value $50000. buy out condition at the end of lease $1
with ownership. Monthly lease $1000+130.HST=1130. Per month for 50 months. This is capital lease.
(As per IFRS16 there is no mor difference between Capital lease or Operating lease) As per new rules all lease will be treated as Capital assets and liabilities.
MY QUESTION?
(1) What entry to be posted in Quick Book.
(2) What about HST?
(3) Whether it is to be claimed upfront whicle entering Capital assets as shown in the abouve example(Computer Purchase)
(4) In Vhicle situation how it will woek? Whether we have to claim(Input HST) every month?
(5) How we can claim Depreciation at the end of year in Income tax?.
(6) As in the whole year We claimed in quickbook $12000.+HST.(1000+130+1130$ every month)
Please clear by giving example. How to enter Capital Assets, Monthly entry,type of expenses and deperication at the end of the year.
How the capital will be reduced in Schedule 8 every year.
Any special entry to be made at the end of the yeer in General ledger (Balance sheet) for income tax purpose.
Thanks for chiming in on this thread. It's vital you're able to record your transactions with ease and based on what you've described, I recommend getting in touch with an accounting professional for expert advice on how to record the transactions. I'll also leave this question open in the Community so other accounting professionals can chime in and share their expert advice. Feel free to ask other questions.
Hey,
Your response was very helpful, but what I am having trouble wrapping my head around is that I have to apply HST to the interest expense piece to my capital lease payment which does not make sense to me?
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