Rent lease agreement

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For a 5-year warehouse lease, entities applying Ind AS 116 should recognize a Right-of-Use asset and a lease liability, depreciate the asset, and record interest on the liability. Entities not covered by Ind AS may treat it as an operating lease and charge rent directly to the P&L.

Rajkumar Gutti

Rajkumar Gutti (Querist)

18 June 2026 5 Year rent lease agreement made for business purpose warehouse.
Can this agreement total amount shown in balance - sheet as a liability to show as payable & same amount shown in asset side as fixed asset is essential as per accounting standard.

Is depreciation permissiable.
Or
Directly rent debited to P& L account, without showing effect in balance sheet.
Which is authentic method
Is accounting standard applicable, if yes, which No.

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

18 June 2026 For most businesses under modern accounting standards (Ind AS 116), you must recognize a Right-of-Use asset and a corresponding lease liability on the balance sheet rather than simply expensing rent. You then charge depreciation on the asset and interest on the liability. If your entity is small and not required to adopt Ind AS, you may continue to treat it as an operating lease and debit rent directly to the P&L. You should consult with a Chartered Accountant to confirm if your specific entity falls under the mandatory Ind AS reporting requirements.

Rajkumar Gutti

Rajkumar Gutti (Querist)

18 June 2026 If we adopt accounting standard, what is the accounting entry

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