banner_ad

What is a lease equilibrium reserve?

Others 1292 views 2 replies

Hello,

Can anyone explain in brief what is a LEASE EQUILIBRIUM RESERVE?

Thank You

Replies (2)

As per AS 17 lease accounting, lease rental to be charged to P&L should be on equal basis over the period of the lease. For Example -

period of Lease is 3 yrs

Year 1 - 10000 p.m.

year 2 - 12000 p.m.

Year 3 - 14000 p.m.

As a general practise, lease rental chargeable to P&L is 10000 p.m for year 1, 12000 p.m. for year 2 and so on. but as per the AS, lease rental should be charged in the following manner -

equalised lease rent p.m. = (1000*12+12000*12+14000*12)/3*12 = 12000 p.m over a period of 3 years

In this case rent for the 1st year would be 12000*12 = 144000 instead of 10000*12 = 120000. So the diff. of 24000 thousand will be transferred to lease Equalisation reserve a/c. Same practise will be followed for 3 years (i.e. lease period) and at the end of the lease period lease Equalisation reserve a/c will be zero.

 

Thank You Sandeep...

That solves my query..


CCI Pro

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
26 May 2026
CA / MBA (Finance) / CMA / M.Com (Finance)

Sri Aurobindo Gnostic Centre of Education

New Delhi

CA

View Details
Company
10 June 2026
Senior Account Executive

JDS Advisory LLP

Ahmedabad

CA Inter

View Details
Company
01 June 2026
Audit, Taxation & Compliance Executive

R P S K & Associates

Nashik

CA Inter

View Details
Company
ARTICLESHIP 28 May 2026
Accounts, Audit & Compliance Executive

Shyam Joshi & Associates

Pune

B.Com

View Details
Company
14 May 2026
Senior Accounts Executive

Karan Gupta & Co.

New Delhi

Graduate (Any)

View Details
Company
Featured 27 May 2026
Lead Conversion Executive / Sales Closing Executive

SMJ global advisors pvt ltd

New Delhi

B.Com

View Details
Company
ARTICLESHIP 17 May 2026
CA Article /Trainee

Malik Sunil & co

New Delhi

CA Foundation

View Details
Company
22 May 2026
Audit assistant

Displayandbeyond

Mumbai

CA

View Details