Right-of-Use Asset - Equipment
The value of machines or vehicles held under a long lease, on the Balance Sheet. Depreciated over the lease term.
In detail
Right-of-Use Asset - Equipment records machines, vehicles or other equipment the company controls under a lease longer than twelve months, such as a delivery van hired for two years or a generator on a long contract. Like the property version it is measured at the present value of the committed rentals, with a matching Lease Liability, and depreciated straight line over the lease term through Accumulated Depreciation - Right-of-Use. Month-to-month hires and low-value items such as a photocopier on a short rental stay as Operating Lease Rentals. A travel business leasing tourist vehicles for the season will usually be under twelve months and never needs this ledger; one leasing buses for years does.
Formula
Initial value = Present value of lease payments; Monthly depreciation = Initial value / Lease term in months.
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Right-of-Use Asset - Equipment | Rs 3,00,000 | |
| Lease Liabilities - Non-Current | Rs 3,00,000 |
How to record it in BRAccount
- 01Confirm the lease runs more than twelve months and get its present value from the auditor's schedule.
- 02Go to Invoicing > Journal Entry > New dated the lease start; debit this account, credit Lease Liabilities - Non-Current.
- 03Submit. The entry above posts for the two-year van lease.
- 04Create the Asset with category Right-of-Use Assets and a 24-month life so depreciation posts monthly.
- 05Post each rent payment with a Payment Entry against the Lease Liability, splitting the interest to Interest on Lease Liabilities.
When to use it
Post by Journal Entry when a long equipment lease starts. Monthly rent on short hires goes to Operating Lease Rentals instead.
Example from the demo books
Dr Right-of-Use Asset - Equipment Rs 3,00,000, Cr Lease Liabilities - Non-Current Rs 3,00,000 for a two-year lease of a delivery van.