Amortizing Capital Leases

You can set up asset items in the Equipment hub for capital leases that will be amortized when you run Depreciation Processing in the Asset Management application.

The capital lease (asset item) must be created from purchasing items whose category type is Capital Item.

Deltek uses the straight-line depreciation method for amortizing capital leases. In the Equipment hub, you identify an asset item as a prepaid item by selecting Lease in the Calculation field on the GL Book tab.

Before You Can Amortize Capital Leases Using Depreciation Processing

You must complete the following information before you can amortize capital leases in Depreciation Processing:

Location	What You Must Complete
Transaction Center > Transaction Entry	Enter a journal entry for the present value of the minimum lease payments: Account Debit Credit Capital Lease (Balance Sheet) X Lease Obligations (Balance Sheet) X Do not associate the journal entry with the capital lease asset item.
Equipment Hub	Manually create an asset item for the capital lease in the Equipment hub.
GL Cost tab in the Equipment Hub	For the capital lease asset item, enter the amount that will be amortized over the term of the lease (depreciation basis). To do this, enter a row in the Acquisition Cost grid on the GL Cost tab, with the following information: In the Amount field, enter the present value of the minimum lease payments. In the Account field, enter the same Capital Lease account that you entered in Transaction Entry for the journal entry to record the capital lease. The amount to amortize applies for both your GL book and any additional books that you set up, which display on the Additional Books tab in the Equipment hub. On the Additional Books tab, you can also enter additional cost information to change the amortization amount (depreciation basis) for additional books as needed.
GL Book tab in the Equipment Hub	For the capital lease asset item, enter the following information on the GL Book tab, which applies for your general ledger book: In the Asset Status field, select Active. You cannot run depreciation processing for the prepaid item until it has an active status. In the Calculation field, select Lease. The Method field prefills with Straight-line, which you cannot change. The straight-line calculation is: Monthly Amortization Amount = (Leased Asset Item Cost – Salvage Value) / Total Number of Accounting Periods in the Life of the Lease The amounts for this calculation are determined by the entries that you make on the GL Cost tab, GL Book tab, and Additional Books tab (if you set up additional books). In the GL Accounts section, general ledger accounts prefill in the Accumulated Amortization and Amortization Expense fields, based on the asset type that you entered in the Asset Type field on the GL Book tab. You can change these accounts as needed. These are the accounts that will be used for the journal entries that are created when you process depreciation for your general ledger (GL Book). In the Lease Details section, enter: Dates in the Lease Start Date and Lease End Date fields. These dates determine the number of accounting periods to amortize the lease and the period in which to start processing amortization when you run depreciation processing. The Useful Life in Years field on this tab does not apply for leases. Example: You enter a lease start date of January 15, 2016 and a lease end date of January 14, 2017. Amortization will be calculated for 12 periods, starting in the period that begins after February 14, 2016. The lease vendor name and vendor contact (optional).
Additional Books tab in the Equipment Hub	For the capital lease asset item: If you set up any additional books to calculate depreciation or amortization differently from your general ledger book, the following items apply specifically for leases when you complete the information in the grid on the Additional Books tab and in the fields below the grid for each row in the grid: The Method field prefills with Straight-line, which you cannot change. The lease start and end dates that were entered on the GL Book tab apply for the additional books.

Depreciation Processing

You process monthly amortization by running Depreciation Processing in the Asset Management application. When you run depreciation processing for your GL Book, these journal entries are created for your general ledger:

Account	Debit	Credit
Capital Lease Amortization Expense (Profit and Loss Statement)	X
Accumulated Amortization of Lease Expense (Balance Sheet)		X

These general ledger entries do not apply for any additional books that you set up.

Accounts Payable Payment Processing

When you complete an AP Payment Processing run to make a monthly lease payment, the following entries are created for your general ledger:

Account	Debit	Credit
Lease Obligations (Balance Sheet)	X
Interest Expense (Profit and Loss Statement)	X
Property Tax (Profit and Loss Statement)	X
Cash (Balance Sheet)		X