Across the board, both large and small entities have found leasing fixed assets to be a viable alternative to purchasing them. Leasing an asset is much easier than purchasing outright, and leasing fixed assets is a popular choice among entities that do not want to tie up capital in fixed assets or take on additional debt through financing these purchases.
There are two ways that these leases can be treated depending on the lease terms and that’s either as capital leases or operating leases. For a capital lease, the asset comes on the books and is depreciated as any other fixed asset while the interest is then treated as a separate expense. Operating leases are those that are not on the books and only the lease payments are accounted for in the records.
Dealing with both capital leases and operating leases effectively requires that organizations stay on top of contractual information as the terms and conditions of each lease varies; anything that slips through the cracks could be costly. Crucial dates need to be recorded in addition to important terms of each operating and capital lease, and the most effective way to deal with these leases is to manage them within a specialist fixed asset software system. Not only will the system record all the crucial data on the lease contracts but it will accurately track the assets as they move locations.
Many of our customers opt for the Asset4000 and the Lease4000 modules to track their operating and capital leases properly and in accordance with current regulations. This enables lease descriptions to be recorded in the asset register along with asset codes and important dates while lease payments and other pertinent financial data records are maintained.
For more information on Real Asset Management’s lease accounting software, email email@example.com.