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Financial Lease


In this section, we discuss how you can register a Financial Lease plan in your accounting system.
Note: Financial Lease is a deceptive term, because it's not really a lease plan,
but a *loan* where the purchased car acts as collateral.

Example
Say that we want to buy a new BMW for 50.000 euro.
The BMW dealer offers Financial Lease as a financing option.
We only have to pay an upfront amount of 10.000 euro.
The rest will be financed with a loan from lease provider: "BMW Financial Lease".

Registering a Financial Lease plan consists of multiple steps.

Assets
We talk a lot about assets in this section.
Assets are what the company owns.
All assets appear on the left side of your balance sheet.




Step 1: Register Financial Lease


We will register the loan with the lease company on a separate account.
This will provide better insight into our accounting.

Step 1: Register account
Go to: "Accounting > Account" and click on "New Record".
Specify name: "Loan BMW Financial Lease".
Select account group: "Long term liabilities".

Our loan has a duration of several years, so we place the account
under section "Long term liabilities" on the balance sheet.

Click on "Save".

Step 2: Register the loan
You use a custom voucher to register the loan.
We will never receive the loaned amount directly,
because the lease company directly pays this amount to the dealer.
But for our accounting purposes, we have to pretend that we received the amount directly
from the lease company, and that we transferred the amount to the dealer.

Go to: "Accounting > Custom voucher".
Select supplier: "BMW Financial Lease".
Select transaction type: "Income".
Add a DEBIT line for account "Debtor" for 40.000 euro.
Add a CREDIT line for account "Loan BMW Financial Lease" for 40.000 euro.

Click on "Save & Post".

Next, click on "Add Payment".

Select payment source: "Cross payment".
Specify amount: 40.000

Click on "Save & Post".

We never physically receive the 40.000 euro, that's why we have to
register the received amount as a cross payment.

Note: the voucher is of type: income.
We have a claim on the lease company for the borrowed amount.
So we're not dealing with income in the traditional sense of the word.
Income simply indicates to the system that an amount needs to be received.




Step 2: Register car purchase


We can now register the purchase of the car.

Step 1: Register account
We need to place the purchased car on our balance sheet.
We will first create a separate account for our company cars.
Go to: "Accounting > Account" and click on "New Record".

Specify name: "Company cars".
Select account group: "Fixed Asset".

Click on "Save".

Step 2: Register expense
We need to add the company car for the purchase amount on the balance sheet.
This is the amount including VAT/TAX.
The purchase will be registered as a receipt.

Go to: "Expenses > Bills & Receipts" and click on "New Record".
Select supplier: "BMW Dealer".
Add a new line.
Select account: "Company cars".
In the amount field, make sure that you specify the amount including VAT/TAX.

Click on "Save & Post" to finalize the registration.

We will now post two payments on the receipt.

We will first add the borrowed amount as payment.
Click on "Add Payment".
Select payment source: "Cross payment".
Specify amount: 40.000.
Click on "Save & Post".

We will now register the down payment.
Click on "Add Payment".
Select payment source: "Company bank account".
Specify amount: 10.000.
Click on "Save & Post".

You have now successfully registered the purchase of your new company car.

The car appears on your balance sheet under category: "Fixed asset".
Also note that the system has automatically registered an asset for you.
Go to: "Accounting > Asset" to see all the company's assets.




Repayment Financial Lease


Each month, you receive a statement from your lease company that specifies
your monthly payment and interest amount.
Assume that your monthly payment is 300 euro.

Go to: "Accounting > Custom voucher" and click on "New Record".
Select transaction type: "Neutral".
Add a CREDIT line for account "Creditor" for 300 euro.
Add a DEBIT line for account "Loan BMW Financial Lease" for 300 euro.

Click on "Save & Post".

You successfully registered the repayment on the loan.
Consult your balance sheet to see that account "Loan BMW Financial Lease"
has been lowered with 300 euro.




Register interest payments


Assume that the monthly interest costs are 100 euro.
We first need to register an account for our interest costs.

Step 1: Register account
Go to: "Accounting > Account" and click on "New Record".
Specify name: "Paid interest".
Select account group: "Expenses".

Click on "Save".

Step 2: Register interest costs
Use a receipt to register the paid interest.

Go to: "Expenses > Bills & Receipts" and click on "New Record".
Add a line for account "Paid interest" for 100 euro.
Specify VAT: "N.V.T. 0%".
In the description you can e.g. specify: "Interest BMW Financial Lease, JAN 2018".

Click on "Save & Post".

Next, click on "Add Payment".
Specify amount: 100 euro.
Click on "Save & Post".

You have successfully registered the interest costs.




Depreciations


You can write off on your assets at the end of year.
With a Financial Lease construction, you become the owner of the car,
so you're allowed to write off on the asset.

Step 1: Register fiscal year
All asset depreciations need to be linked to a fiscal year.
Go to: "Accounting > Fiscal year" and click on "New Record".
Specify the year, for example: 2018.

Click on "Save".

Step 2: Depreciate asset
Go to: "Accounting > Asset" and select the car.
Click on "Add depreciation".

You can specify an amount or a percentage.
In the Netherlands, you're allowed to write off 20% of the purchase amount each year.
This means that you can fully depreciate the asset in a period of 5 years.

Click on "Save & Post".

Note that the write off is divided across all the months of the year.
The costs aren't posted to a single month, because the car has been used all year long.
So each month accounts for a bit of the depreciation.


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