AS-19 journal entries

Lessee: 

RTU Asset a/c

To Current liability

To Non Current liability

(Asset recognised at cost equivalent to payments of principle and interest)

Depreciation a/c

To Fixed Asset a/c

(depreciation of asset)

Maintenance, Lease payments a/c

To Current liabilities a/c

(maintenance costs expenses incurred)

Current Liability a/c

To cash a/c

(Lease payments met for current period)

Lessor:

Depreciation a/c

To Lease Asset a/c

(depreciation charged)

Total Rental receivable a/c

To Total Lease Income a/c

(recognising Lease accruals)

Cash a/c

To Rental receivables a/c

(when Lease instalments are met)

The above treatment in the books of the Lessor was for existing finance lease. For new finance lease, it is like below:

Lessor: Finance Lease

Lease receivables a/c

To Lease Asset a/c

(Asset derecognised)

Lease receivables a/c

Direct costs a/c

To Total Lease Income a/c

(recognising Lease accruals, direct costs included in investment)

Cash a/c

To Lease receivables a/c

(when Lease instalments are met)

Here, I have recognised the whole rental income based on accruals concept and not on revenue recognition model neither in instalments.

U have not considered the interest payables by lessee and receivable by the lessor.

the entries relating to interest needs to be accrued and paid / received.

Actually, I was learning the new standard at that point of time. I will update this soon. This leases are inadequate to learn even today. Thank you for raising a concern 

Okay 

On a second thought, I think I have put it into current and non current liabilities. The standard does not suggest that. But lease payments are annual, so I put principal and interest into current liabilities for this year’s payables. I missed interest in lessor. Thanks once again, I have to borrow a text book as this and construction contracts is outdated in my text book. Nice day.