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jaybo767
April 1, 2024
Question

Properly recording a Lease journal entry

  • April 1, 2024
  • 2 replies
  • 0 views

The beginning of the year I signed a building lease and set up a lease liability account( current liability) and a lease expense account.  

My questions is,  when making a journal entry for lease payments what would be the forth account to balance the transaction.   The bank decreases,  lease liability decreases, lease expense increases,  what would be the other account to balance the entry?

2 replies

BigRedConsulting
BigRedConsulting
April 14, 2024

Not sure you need a liability account. A building lease is basically renting, an expense.

    Rainflurry
    Rainflurry
    April 15, 2024

    @jaybo767 

     

    I would be surprised if you need to create GAAP-compliant financial statements with the new lease accounting standards if you're asking this question on a QB forum.  If you don't need to apply GAAP-compliant lease accounting, just record the expense as @BigRedConsulting mentioned. 

     

    If you need to create GAAP-compliant statements with the new lease accounting standards, when you originally set up the lease, the liability is offset by a Right-of-use (ROU) asset account.  You need to calculate the NPV of the asset/liability and then that is split between interest (reduces payable)and amortization (reduces asset) to come up with your total rent expense.  That is a topic that is far too in-depth for a forum like this IMO.         

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