Leases can be complicated since they involve a review and analysis of whether the agreement is actually a lease or a conditional sales contract.
To record Lease Payments
- If you are positive that the lease or rent is a traditional lease, you can create a Lease Expense account and debit this account for payments.
- If your lease is actually a conditional sales contract we strongly encourage you to speak with your accountant. According to the IRS ruling, "payments made under a conditional sales contract are not deductible as rent expense." With the advisement of your CPA, you should decide if you want to show this as an expense on your books.
- An additional resource can be found in Chapter 4 of the IRS Publication 535: Business Expenses.