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Sunil Kumar Gupta
says
: Accounting entries in case of Finance Lease
Sir, We are in service industry. The particulars of case are as under: a) Cost of the assets is Rs. 1 cr. b)Net Investment in lease is Rs. 2.10 Cr. c)Unearned Income is Rs. Rs. .50 Cr. d)Period is 3 yrs. e )Life of equipment is 10 yrs. f )Nature of equipments is normal As per our understanding, based on above data, this should be finance lease. Could you tell us that can it be treated as operating lease if there is Termination Clause. If we book the sale by Rs. 2.10 Cr. i.e. net investment in lease by treating it as Finance Lease, whether we have to pay sales tax. If yes, what would be the treatment if leasee terminates the lease contract one year. It means we will loose the sales tax amount. We request you to kindly guide us. Regards CA. Sunil Kumar Gupta
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