NetLessor Operating Journal Entries Overview
Lease Journal Entries
Unless stated otherwise in the specific example, all entries below are based on a lease with the following characteristics:
- Commencement Date = 1/1/2022
- Go-Live Date = 1/1/2022
- Economic Life of Leased Asset = 48 months
- Term = 24 months
- Initial Payment = $2,000
- Leased Asset Fair Value = $500,000
- Leased Asset Carrying Cost = $428,571.43
- Refundable Deposit = $5,000
Go-Live Entry
Additional Information:
- Commencement Date = 1/1/2021
- Initial Direct Costs = $5,000
- Lease Payment Increase on 1/1/2022 to $3,000
Note: since the commencement date is 1/1/2021 and the go-live date is 1/1/2022, the initial direct costs have already been 50% amortized. Thus, the go-live entry only includes $2,500.
Offsetting Manual Entry:
| Debit | Credit | |
| Go-Live Clearing | 8,500.04 | |
| Capitalized Initial Direct Costs | 2,500.04 | |
| Deferred Rent Receivable (Deposit Liability) | 6,000.00 |
Initial Balance Entry
NetLessor only books an initial balance entry for operating leases if the lease has initial direct costs or prepayments.
Additional Information:
- Initial Direct Costs = $5,000
Offsetting Manual Entry:
| Debit | Credit | |
| Lease Capitalized Costs or Prepay (Clearing) | 5,000 | |
| Cash or Payable | 5,000 |
Additional Information:
- Prepayment = $5,000
Offsetting Manual Entry:
| Debit | Credit | |
| Cash or Receivable | 5,000 | |
| Prepay (Clearing) | 5,000 |
Monthly Amortization Entry
Additional Information:
- Initial Direct Costs = $5,000
Additional Information:
- Lease Prepayment = $5,000
Additional Information:
- Lease Payment Increase on 1/1/2023 to $3,000