If you lease equipment or real estate to operate your business, you’re likely familiar with the concept of lease accounting. This type of accounting requires accounting professionals to be familiar with certain standards that extend beyond GAAP.
What is Lease Accounting?
Lease accounting is the process of recording and reporting leases on a company’s balance sheet. The goal of lease accounting is to provide financial statement users with information about a company’s leasing activities and the associated risks and benefits.
There are two types of leases: operating leases and finance leases. Operating leases are typically short-term in nature and are not recorded on the balance sheet. Finance leases, on the other hand, are recorded on the balance sheet as assets and liabilities.
4 Reasons to Use Lease Accounting Software
There are many reasons why you might want to use lease accounting software. Here are four of the most important reasons:
1. To Comply with New Accounting Standards
The most important reason to use lease accounting software is to comply with new accounting standards. In 2016, the Financial Accounting Standards Board (FASB) issued a new accounting standard for leases, ASC 842. This standard requires all leases to be recorded on the balance sheet as assets and liabilities.
2. To Improve Accuracy and Efficiency
Lease accounting software can help improve the accuracy and efficiency of your lease accounting process. When you use software to manage your leases, you can be sure that all of the necessary data is being captured and that it is being reported in accordance with GAAP.
3. To Save Time
Another important reason to use lease accounting software is to save time. If you’re still using manual methods to track and report your leasing activity, you know how time-consuming and error-prone the process can be. Software can automate many of the tasks involved in lease accounting, freeing up your time to focus on other areas of your business.
4. To Reduce Costs
Finally, lease accounting software can help reduce the costs associated with your leasing activity. By automating the process and improving accuracy, you can avoid the costly mistakes that can occur when leases are managed manually.
If you’re looking for a way to improve your lease accounting process, consider using lease accounting software. This type of software can help you comply with new accounting standards, improve accuracy and efficiency, save time, and reduce costs.
What Software is Best?
Unlike traditional accounting which relies on software like Quickbooks, lease accounting is a bit more complicated. This is because of the unique nature of leases and the specific standards that must be followed. As a result, it’s important to choose software that is specifically designed for lease accounting.
When choosing lease accounting software, be sure to consider your specific needs and find a solution that offers the features and functionality you need to manage your leases effectively.