Accounting for vehicle costs in a rental agreement

Accounting for vehicle costs in a rental agreement

 

Question:
Hello!

My question is related to cost reporting - I have a contract for renting a vehicle with the option to acquire. An invoice has been issued for the first installment and has been paid.

The vehicle has not been acquired, as not all installments will be paid.

Can this be an annual expense or not?

If this invoice is not posted as an expense, I make a profit. The company deals with transport.

Thanks for the guidance.

 

Answer:

Hello,

It depends on what purpose the car is used for. In order to admit the full costs, the car should be used only for business purposes and to keep travel lists / travel book. If there is also personal use, then the costs should be distributed in proportion to the personal and official use. There are several options for the proportional distribution of personal and official use, which are described in Art. 215a of CITA.

In this case, we see no problem in recognizing the costs associated with the car - depreciation, fuel, consumables, repairs, etc.

Perhaps, rather, the question here is whether the car can be accounted for as an asset of the company and, accordingly, whether depreciation costs can be charged. If the car contract is for financial leasing, then this car should be credited to the assets of your Company and the corresponding depreciation costs should start to be charged.

We hope we have been helpful to you.

Greetings!