Lease Liabilities - Current
The part of long lease rent due within the next twelve months, on the Balance Sheet.
In detail
The slice of a lease liability that will be paid in the next twelve months lives here; the rest stays in Lease Liabilities - Non-Current. Each lease payment is split: the interest part, worked out from the rate used when the lease was first measured, goes to Interest on Lease Liabilities, and the remainder reduces this ledger. Over the lease the interest share falls and the principal share grows, exactly like a bank loan schedule. At every Ashadh end a Journal Entry moves the coming year's principal from the non-current ledger into this one. Paying lease rent straight to Office Rent while a lease liability is on the books double-counts the cost.
Formula
Monthly principal reduction = Lease payment - (Opening liability x Discount rate / 12)
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Lease Liabilities - Current | Rs 18,250 | |
| Interest on Lease Liabilities | Rs 6,750 | |
| Bank Account | Rs 25,000 |
How to record it in BRAccount
- 01Keep a lease schedule showing interest and principal for each payment date.
- 02Go to Invoicing > Journal Entry > New on the payment date.
- 03Debit Lease Liabilities - Current for the principal and Interest on Lease Liabilities for the interest.
- 04Credit the bank account for the payment made.
- 05Submit. The entry below posts and the liability falls.
- 06At Ashadh end, transfer next year's principal from Lease Liabilities - Non-Current to this ledger.
When to use it
Post by Journal Entry at year end to move the next year's rent from the Non-Current account. Reduce it with each monthly Payment Entry.
Example from the demo books
Dr Lease Liabilities - Current Rs 18,250, Dr Interest on Lease Liabilities Rs 6,750, Cr Bank Account Rs 25,000 for the Shrawan payment on the Thamel office lease.