# How to lease a copier

## Record the Lease as an Expense

Step 1

Record your monthly payment. Debit the expense account, “Office Equipment Expense,” for the amount of the monthly lease payment. Credit the asset account, “Cash,” for the same amount.

Record the debit half of your monthly payment and interest separately. Credit the asset account, “Cash,” for the combined amount of the interest and principal.

## Record the Lease

Step 1

Calculate the total value of the lease by multiplying the monthly principal payment by the months of the lease. The total value of the lease is in the lease paperwork. For example, a 36-month lease for \$500 a month is \$500x36=\$18,000. The total principal value of the lease is \$18,000.

Step 2

Calculate the dollar amount for the interest on the lease. The total interest is in the lease paperwork. To calculate the interest on the lease, multiply the interest percentage by the total value of the lease to get the total interest and divide the figure by the term of the lease to get the monthly interest rate. For example, an \$18,000 lease with a 10 percent interest rate and a 36-month term is \$18,000x0.10=\$1,800 in total interest for the lease. Monthly, your interest rate is \$1,800/36 months=\$50.00.

Step 3

Record the journal entry for the lease. Increase the asset account, “Equipment,” with a debit for the total amount of the lease principal. Increase the liability account, “Notes Payable,” with a credit for the total amount of the lease principal.

Step 4

Record the journal entry for the lease interest. Increase the expense account, “Interest Expense,” with a debit for the amount outlined in the terms of the lease. Increase the liability account, “Interest Payable,” with a credit for the amount outlined in the terms of the lease.

Step 5

Record an interest payment. Decrease “Interest Payable” with a debit for the amount of the interest payment. Decrease “Cash” with a credit for the amount of the interest payment.

Record a principal payment. Decrease the liability account, “Notes Payable,” with a debit for the amount of the principal. Decrease the asset account, “Cash,” with a credit for the amount of the principal.

Record an interest and principal payment. Decrease the liability account, “Notes Payable,” with a debit for the amount of the principal. Decrease the liability account, “Interest Payable,” with a debit. Decrease the asset account, “Cash,” for the combined amount of the principal plus the interest with a credit. Companies that lease equipment send a monthly bill so these figures will be available to you.