Possible incorrect lease treatment

[PeteB]

Hello,

I have been leasing some photographic equipment through my limited company. Around 2k worth, I pay around £60 +vat a month over 3 years.

For over a year now I have been expensing though the P&L the cost of the lease with no other accounting entries. I have now learned that this is the treatment for an operating lease but in fact my lease my be a finance lease which is different.

My first year accounts have already been submitted what should I do?

Thanks

Pete

 

[UK Contractor Accountant]

You will probably need an Accountant to sort this out for you. It involves a prior year adjustment, restatement of last year's balance sheet, and correction of opening balances for the current year.

There are specific Financial Reporting Accounting Standards which need to be followed which is a bit to technical for this forumn.

 

[Bob]

.. but possibly at £2K over 3 years not worth worrying about

 

[PeteB]

Do the previous year accounts need to be refiled? Or can I not just correct the mistake moving forward?

 

[Scalloway]

It would be simplest to leave it as it is. What happens to the asset when you stop paying the lease?

 

[PeteB]

I have checked the agreement and it says its a Hire agreement. Fixed period of 36 months. If it is terminated early they repossess the equipment.

It says if it is terminated I have to return it. I am not sure if this means early. It says nothing else about what happens at the end.

I was told the following, which is what it states on the website:

Q:
What happens at the end of the lease?


A:
We will extend the agreement indefinitely on payment of a single further monthly rental. After that you can keep the equipment and will never have to pay any more.

Thanks

Pete