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Indian Leasing by Vinod Kothari

Examples on Calculation of Capital Recovery and Lease equalisation 

CASE 5: SECURITY DEPOSIT BEARING INTEREST

ASSET COST

1000

RENT

285

YEARS IN LEASE

5

ACCOUNTING IRR

24.00%

FINANCIAL IRR

24.49%

LMF

1.00%

DEPRECIATION RATE

11.00%

RESIDUAL VALUE

0.00%

SECURITY DEPOSIT

10.00%

INTEREST ON DEPOSIT

15.00%

YEAR

LEASE

INV. O/S

SEC.

INTEREST

CUMLAT.

FIN CRG.

CAP. REC.

DEPRN.

LEA

LTA

RENT

DEP.

DEPOSIT

0

100

1

285

1000

100

15

115

163

122

110

12

12

2

285

878

100

17

132

132

152

110

42

54

3

285

726

100

20

152

94

191

110

81

135

4

285

535

100

23

175

46

238

110

128

263

5

285

297

100

26

201

-13

297

110

187

450

1000

PROFIT AND LOSS A/C

DEBITS

YEAR 1

CREDITS

DEPRN.

110

LEASE RENT

285

NET CREDIT

148

LESS: LEA

12

INTEREST

15

258

273

YEAR-WISE VIEW OF P & L ACCOUNT

YEAR

CREDITS

REDN.

DEBITS

NET

LEASE

LEA

DEPRN.

CREDIT

RENT

1

285

12

110

163

2

285

42

110

132

3

285

81

110

94

4

285

128

110

46

5

285

187

110

-13

BALANCE SHEET

ASSETS

FIXED ASSET

COST

1000

LESS: DEPRN.

110

LESS: LTA

12

878

YEAR -WISE VIEW OF BALANCE SHEET

YEAR

FIXED

ASSET

NET

COST

DEPRN.

LTA

VALUE

1

1000

110

12

878

2

1000

220

54

726

3

1000

330

135

535

4

1000

440

263

297

5

1000

550

450

0