Finance Leasing Manual - FLM10.44

Example 1: lease terminated early: reconciliation of lessee's cash outlay

On the basis of the information at FLM10.42 and FLM10.43 the total cash outlaid by the lessee can be reconciled with the charges made to its profit and loss account over the period of the lease until it is terminated to the to profit and loss account, as follows:

Cash position

Rentals paid for primary period: 4 x £12,400 = £49,600

Rebate received (29,100)
--------
Net Outlay £20,500
--------


Charge to Profit and Loss Account

Depreciation: 4 x £2,500 = £10,000

Finance charges 11,200

plus extra on disposal 400

Profit on sale ( 1,100)
--------
Net charge £20,500
--------