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Mar 28, 2024
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BS5832 - Accounting for Leased Purchase Equipment Procedure
Section: BUSINESS SERVICES PROCEDURES
SubSection: BUSINESS OFFICE
Master List Section: Business Service
- Institutional Regulation
Equipment that is purchased under a Lease Purchase Contract must be accurately recorded in the College’s accounting records and the inventory of equipment.
- Procedure
- The Vice President, Business Services, must approve all Lease Purchase Contracts.
- A Purchase Order shall be prepared showing the date and amount of each of the periodic payments and the total of all payments.
- The Business Office will record each payment, when made, making the appropriate division between principal and interest.
- A copy of the Purchase Order must be given to the Business Office to assure proper accounting.
- The department’s expense account should reflect only the amount actually paid in any fiscal year.
- The Business Office will account for the transaction as follows:
- In the Plant Fund, a Leased Equipment asset will be recorded at the cost of the equipment and a Leasehold Payable liability at the same cost.
- The cost at which the asset is recorded shall be the total lease payments to be made less the portion of the payments that relates to interest.
- At the close of the fiscal year the amount in the department’s expense account will be reclassified as a reduction of the Plant Fund liability.
- When the final payment is made, the Business Office will transfer the cost of the equipment from the Leased Equipment asset account to the Furniture, Machinery and Equipment asset account.
Adopted: July 1, 2000
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